As thoughts of an expanding trucker strike in Brazil have faded, so has the willingness of traders to buy or hold existing longs and prices did an about face yesterday. Grain markets surrendered Friday’s gains and over in beans, a large portion of last Thursdays strength as well. You certainly cannot fault the market for trying to build in a little risk premium due to the trucker strike but as with any situation like this, the effects tend to be short-term. For those who trade this kind of news it is basically live by the sword, die by the sword. We do need to keep in perspective that there has really been nothing resolved in Brazil and there will be potential for spikes ahead but seeing this was not a well organized or financed movement, the impact would likely be temporary.

As we see bean inspections fade, corn continues to pick up a little volume and last week we posted the largest loadings for the marketing year at 50.4 million bushels. This was 41% higher than the previous week and nearly double the 10-week average and brings inspections to date up to 731.66 million bushels. If I am not mistaken, this is also the first time we have posted a weekly figure above the average needed to reach the target, which now stands at 39.2 million per week. Conversely bean inspections were down 34% from the previous week and 59% from the 10-week average coming in at 23.3 million bushels. This is a pattern we should see continue right into the summer months and at the pace we have been dropping we could be below the pace needed to reach the USDA targets within a couple weeks. This currently stands at 9.6 million bushels. Note that 68% of the beans loaded, or 15.8 million bushels were headed for China. The next two countries combined took 4.2 million. Wheat inspections most certainly did not excite anyone either at 16.5 million. This number was down 14% from the previous week but still 36% above the 10-week average. To reach the targeted 900 million bushels we need to push the average for the next 13-weeks up to 21.3 million. That is looking quite questionable and this after the USDA already trimmed the forecast.

Although much of the upper Midwest is dealing with snow and ice this morning, the forecast into the weekend and beyond are calling for rising temperatures and as such, ideas will also be turning more towards spring planting. We have seen prices bounce back overnight but at this point I am not sure if it can be considered much more than a Tuesday undo bounce. That said, I continue to believe that markets should track in a generally sideway pattern through much of March and the grains stocks and acreage number but unless we find something that provides a positive story at that time, we could then be in a defensive pattern until summer.

New month, pretty much the same old action. Generally mixed trade overnight with beans, wheat and soy oil higher with corn and soy meal trading a bit defensively but no significant action really anywhere. Even over in the macro scene, there would appear to be little noteworthy as we have metals higher, energies lower and the dollar soft and directionless at this time. Markets need an injection of fresh news and I am not sure where and when that will be coming next.

The biggest story from last week, which was the Brazilian “sort of” trucker strike continues to linger as there has technically been no resolution but I understand the strike or blockades have ended in most key areas. This is not to say that the action has not created a mess with the Ag economy within that country as feed manufacture and delivery has been disrupted as well as movement of livestock and milk not only from the farm but away from processing plants to the retail sector as well. Even if there are no further actions that would stop the movement of commodities many feel it could take the better part of a month to return to normal. There are meeting scheduled between the government and truckers for the 10th of March but the fact that this is not a centrally organized strike continues to complicate the situation. Beans have again been moving to ports and without further disruptions there should be no major issues with exports but as I said last week, until there is an official “resolution” in place, there is risk of additional problems ahead. According to Safras, harvest in Brazil is now 28% complete, which is 13% behind the average pace.

The USDA is now collecting information for the prospective planting and grain stocks reports to be released at the end of this month and the private estimates will be filtering in soon. As I commented in the weekend newsletter, I believe there is a risk of a negative surprise in beans seeing that some around the world accepted the Ag Forum numbers as gospel but if we have private estimates projecting higher numbers that should help buffer the impact. Informa will release their estimates tomorrow.

For now, I continue to believe we will be looking at generally directionless markets.

The Brazilian trucker strike remains the topic du jour and a lack of any kind of real resolution brought fund buying back to the bean market yesterday, which then bled over to corn and wheat and prices have continued to advance again overnight. Sitting a good 4 to 5,000 mile away from the issue it is easy to find conflicting stories as to the overall situation and the fact that this does not appear to be a centrally organized movement makes that all the more difficult. Some regions report that blockades are reducing while other increasing but it would be obvious that there is no general consensus as to if the court ordered government authority to level hefty fines has been enough to turn the tide. As I commented yesterday, until there is some type of final resolution markets will want to maintain a risk premium and will remain the center of focus until something else draws the attention of traders.

This is the last trading day of February so one would expect to see lighter volumes and possibly a little evening up of positions but as it stands right now, we have corn and beans looking at a higher monthly closes and wheat basically flat. While it may not feel like it with this recent performance, when viewed from a longer-term perspective, all three of these markets remain in an overall sideways range and the longer-term technical indicators are sitting in an overbought position and teetering on the edge of crossing lower. If the transportation issues remains unresolved come Monday, one would have to imagine this recent rebound could extend but lacking that, there would seem to be little else that can hold prices at these levels we have returned to. The average February prices stand at; 4.15 for corn, 9.72 for beans, 5.85 for spring wheat and 64 cents for cotton.

Without the immediate threat of an extended trucker strike in Brazil, markets appeared to have lost the interest of buyers as we sunk lower again yesterday. Both corn and wheat slipped into lower lows for the swing while beans just surrendered a portion of the previous days gains on fund selling.

As I commented yesterday, the movement (pun intended) by the truckers in Brazil may have been masked over with legal action but nothing technically has been settled. Part of the problem I understand is this is not a centrally organized movement so the government really has no one “official” to negotiate with. The government did offer to extend a program of free financing for truckers for a year and freeze fuel prices for six months but by no means does that address the problems and complaints of increased fuel prices, taxes, higher tolls and fixed shipping rates that they feel have been set to low. While I understand the ports and by extension exports of beans have not been affected significantly at this time there are a litany of other internal ill-effects such milk being dumped at the farm level, lack of feed for livestock and lack of fuel to operate farm machinery. And these are just some of the factors impacting Ag. On one side of the coin, we could say that thankfully bean harvest has only reached 21% complete but one could also say with nearly 80% left to go, things better operate pretty smoothly moving forward. Additionally, this slower pace could have a negative impact on the safrinha corn planting. At a minimum this overall situation should remain in the back of traders minds and could help maintain a certain amount of risk premium, particularly in beans until it has been settled.

Export sales for last week really held no surprises but the corn figure was below trade estimates, potentially reflecting the uncompetitive position of U.S. corn in the world market right now. Net sales for the week came in at 715,800 MT or 28.18 million bushels. This figure was 23% below both last week and the 4-week average. The top purchasers were Japan taking 287.8k MT, Columbia at 182.7k MT and then Mexico with 172.2k MT. Bean sales were towards the low end of estimates at 459,200 MT or 16.87 million bushels. This number was down 9% from last week and 26% from the 4-week average. China still the number one purchasers taking 59% of the total or 272.9k MT, followed by the Netherlands at 156.8k MT and rounded out by Japan with 40.1k MT. The wheat numbers were up 23% from last week but still an uninspiring 328,300 MT or 12.06 million bushels. The top three purchasers were Japan for 68k MT, Indonesia at 55k and then Canada with 49.3k MT.

With February rapidly drawing to a close, I have to suspect action over the next few days will be quiet unless confronted with surprise news.

Of course I am dating myself but there is an old Crosby, Stills and Nash song with lyrics that go something along the lines of “if you can’t be with the one you love, love the one you’re with.” It would seem we could paraphrase that with the market action yesterday. If you can’t find much news to trade, trade the news you have. The Brazilian truck strike was the only news of substance around and turned out to be enough of a catalyst to stimulate quite a bounce in beans and by extension the grain markets. By no means do I want to make light of the situation down there as it had evidently grown across the country with the potential to disrupt a harvest/shipping season that is really still in its infancy. Part of the job of a futures market is to factor in changing risk scenarios and if left unattended, this could have turned into a serious problem. While not settled just yet, the Brazilian government turned to the legal system and judges have granted the regions authority to level extremely stiff fines to striking truckers as well as sanctioning police to use force to shutdown blockades when necessary. I wonder how that would have gone over with the recent issues with the west cost dockworkers? Once this was granted, markets surrendered a big slice of the rally and we are soft again this morning. The action by the government appears to be working for now but left unsettled and we could see issues rise up again so until there is a final resolution, beans will probably hold at least some risk premium.

Understandably, when the bean market lost its sizzle yesterday, corn and wheat had few remaining friends and they resumed to the defensive posture that they were in last week. As I have commented previously, I am not longer-term bearish on either of these markets but until we edge closer to acreage and weather concerns, I suspect the general action will be quite sluggish. Internationally, Europe and Ukraine offer the lowest prices for wheat and corn and should garner the lion’s share of business.

We have the weekly EIA Ethanol report later this morning and exports sales tomorrow morning which should give the market a little something to chew on for the next 24 to 48 hours. Outside of that, the February pricing period for crop insurance is closing in with current average prices of 4.15 for corn, 9.69 for soybeans, 5.87 for spring wheat and 64 cents for cotton.

Outside of the weekly export inspections, grain and soy markets really saw a dearth of stories to focus on yesterday. Realistically, the weekly inspections reports should not carry too much weight in the trade when released each week which is partially evidenced by the fact that corn, arguably posted the most positive number for the three basic commodities yet performed the most negatively yesterday.

With bean shipments slowing each week, it has allowed for a pickup in the loadings of corn and wheat and this past week the corn inspection number came in at 35.5 million bushels. This figure was up 24% from the previous week and 31% from the 10-week average and actually one of the highest for the marketing year. Of course the sad side of that story is that the boost only brings us up to the same level as the declining bean shipments and still lags the average needed to reach the USDA target of 1.75 billion but 4 million bushels. As I alluded to, the bean number was basically identical to corn coming in at 35.3 million bushels but in this case it was 28% below last week and 40% below the 10-week average. This number is still well above the average of 10.2 million needed to reach the USDA target of 1.79 billion but unless there turns out to be a major disruption with loadings in South America, this number should continue to edge lower in the weeks ahead. Finally for wheat, we loaded 18.4 million bushels which was 23% above last week and 47% above the 10-week average but the sad part is that is was still only 18.4 million bushels. With 14 weeks left in the marketing year we need to see the average kick up to 21 million per week.

The trucker situation in Brazil has not improved as the strike over high fuel prices has now grown to cover seven states. This morning my associate commented that this is probably one of the most predictable cycles in the world. Like the swallows returning to Capistrano, once harvest kicks into gear in South America, there will be some type of strike along the supply chain that will need to be negotiated. I would not expect the government to sit back and allow this to drag out for long as they are very dependent on the revenues generated from exports.

We have seen a nice little rebound in values overnight and in the case of beans have nearby futures back above the 10.00 mark and nearby corn pressing back against what had been support around 3.80. There is not much in the macros as metals are mixed, energies are a bit higher but so is the dollar. I continue to hold a semi neutral stance on corn and wheat and the same for beans at least for a little bit longer, but in the case of that final market am still concerned that eventually, the rug will be pulled from underneath, particularly if the Brazilian trucker strike comes to an end quickly.

We appear to be starting out this final week of February with rather featureless trade once again. There has been a little two-sided action in beans and wheat with sluggish pressure in corn bug so far we remain within recent ranges. This is the final week for the February pricing period for revenue crop insurance and as of last Friday the average prices were as follows; 4.16 for corn, 9.67 for beans, 5.88 for spring wheat and 64 cents for cotton.

While certainly not unusual for this time of year if there is not a weather issue in South America, news this morning is rather slight. Wheat continues to reel a bit after the US was passed again on Egyptian business which really should not be shocking with the less than competitive prices of US product and the issues with vomitoxin concerns. Probably more of an excuse for selling than the actual reason for selling. The weather outlook in South America looks conducive for a solid pickup in harvest activity. Last Friday truckers across Mato Grosso and other regions where harvest activity is advancing, staged a blockade to protest high fuel prices and plan to return again today. I understand there are meetings scheduled with state representatives to discuss the issues but it would not appear that this will be a major disrupting factor and the lions share of export business should begin diverting to that county. I will write a bit more about it in a later letter but last week one of the speakers that I heard was from Argentina and the problems that farmers in that nation confront, specifically with the existing government are almost beyond belief.

While it certainly will not be the last story on this subject but this morning, Reuters published an article on concerns of farmers walking away from cash rent contracts this year. While the instances of this occurring have been minimal thus far, one real estate expect suggested it could amount to 1% of acreage in 2015. Considering that 40% of the ground farmed in the country is leased, if correct that still could amount to a lot of property.

As I said initially, market specific news is a little sparse. Macros are all negative this morning with equities, energies and metals all under pressure and the dollar higher once again. Thankfully the west coast port labor issue appears to be behind us but it will take weeks if not months to clear up the backlog and return transportation to a normal state and China is returning from the Lunar New Year break. Look for directionless trade until we can find something of more substance to begin focusing on such as the March grain stocks and prospective planting reports.

Markets, and particularly beans appeared to become all aflutter yesterday after the USDA acting chief economist Robert Johansson presented the baseline acreage projections for this coming year. As you have undoubtedly heard, the highlight in the numbers offered was beans and at 83.5 million acres was 200,000 below last year while previous estimates both private and public have indicated anywhere from 2 to 5 million acres increases. Corn acreage was reduced 1.6 million to 89 million and wheat down 1.3 million to 55.5. When you throw cotton into the mix, the figures would suggest a reduction of 4.4 million acres for the four major crops. As witnessed in the price action, the news starved markets evidently took this information as literal truth instead of a statistically based estimate and rallied, but at the end of the day all that beans managed to accomplish was to regain the losses posted on Wednesday.

There is no strong historical correlation to the reports offered yesterday morning and the Prospective Planting report that will be issued at end of March and of course, it is the latter that actually carries market significance. Seeing that report incorporates actual producers surveys, it only stands to reason that it and not the report issued at the annual summit will reflect the situation for the current year outlook but nevertheless, the nature of the market often is to react to the news at hand. While I could never get on board with some of the more extreme estimates of increased bean acres for this coming year, I continue to believe we could see a shift to 1 to 2 million more acres than last for no reason other than it requires less capital outlay than corn in a year when neither crop is offering much in the way of return (if any) at this point in time.

There has been much discussion at this meeting concerning trade agreements, which are understandably important topics as separate agreements with both the EU and Pacific rim countries are being worked on this year. Tying into this has also been discussion of food security and world stability and one speaker went so far as to suggest that the secretary of Ag should sit in as a White House Security advisor as food issues are often a major contributor to instability in other countries. While I am not qualified as to offer an opinion if that should happen or not, I have often spoken about the critical issue of food security and do believe that many outside of agriculture do not full appreciate the risk. Political or religious ideology may catch the headlines but combine that with empty stomachs or runaway food prices and you can really plant the seeds of revolt.

Just a bit later this morning, the USDA will round out the releases with updated balance sheets incorporating yield and usage so of course, if there is nothing else to focus on, markets could become unsettled once again but I doubt any reaction will be sustained beyond today. I intend to report the numbers via twitter once again when issued. Actually the export sales number to be released later this morning should potentially have more bearing on the market than the supply/demand estimates. The trade is expecting to see corn sales in the range of 650 to 900k MT, beans between 375 and 550k Mt and wheat between 300 and 500k MT.

Once we are past this week, the market will have to find something new to focus on and with no real crop issues in South America at this point I am not sure what that might be. Micheal Cordonnier, who I had the pleasure of sitting with at dinner last evening will present his update on those crops this morning as well but outside of a problem in that hemisphere, there is little fresh to discuss. As I have suggested in other letters, we could be in store for a period of rather uninspired markets over the next few months.

It would appear that we are dealing with rather fickle market here during this shortened trading week, which is understandable as volume should be lighter than normal due to the Mardi Gras celebrations in South America and the Asian New Year kicking off today. Beans, which were the leader higher on Tuesday, were likewise the leader lower yesterday as funds bought and sold almost identical quantities each day.

Overall news remains relatively quiet and the majority of that leaning to the negative side. Egypt canceled the tender for U.S. wheat stating the prices were just too high for our product compared with the rest of the world. Even if we were competitive, questions remain as to if we could meet the quality standards due to vomitoxin issues. Also adding to the negative psychology is defensive action over in crude oil, which has rallied away from lows over the past few weeks on ideas of production cutback. It would appear even with a slowdown in production that has not “trickled down” so to speak in inventories as yesterday afternoon the American Petroleum Institute estimated that stocks rose 14.3 million barrels last week compared with the expected 3.2 million. This has taken futures sharply lower again overnight. About the only positive piece of news that I can see around is that the wet weather in Brazil has been a bit of a hamper to harvest with the possibility that some cargoes could be shifted back to the U.S. Unless the poor weather persists, this should be a very temporary factor.

Reports have all been pushed back a day due to the holiday on Monday but most of the focus seems to be on the USDA Ag forum. I am not sure exactly when the base line numbers will be released as last year the acreage was issued on Thursday and the balance of the numbers on Friday. I see on the agenda that this morning the 2015 Agricultural Economic and Foreign Trade session is the first order of business but I am not sure what that entirely will tell us. I will plan in sending updates as soon as I have them.

It turned out that the grains and beans posted a relatively positive performance yesterday but as I said yesterday morning, I have to believe the action was more technical than anything else. This would seem to be bore out by the fact that the market that holds the most obviously bearish fundamentals, namely beans, held the best gains while corn could not push through key overhead resistance and wheat finished towards the lows of the day. It is estimated that funds purchased around 7,000 contracts of beans and 3k of meal.

I cannot say that it was the NOPA crush numbers that brought out the buying. At 162.7 million bushels, the figure was up 5.9 million from a year ago but was down 2.7 from December and was at the low end of trade expectations. Domestic oil stocks grew a bit from last month and domestic meal usage was down for the third month in a row.

Export inspections held no surprises either and beans continue to manipulate the lions share of the action. For the week we loaded 49.1 million bushels, which was 5.5 million less than the previous week but brings the year total to 82.7% of the projected 1.79 billion. To reach that number we need to average just 11.1 million per week moving forward. The corn loadings were up 900k bushels from the previous week at 28.5 million but this number brings us to just 36.9% of the projected 1.750 billion and means we need to average 39.5 million a week moving ahead to reach that target. This is looking increasingly doubtful. Finally, wheat comes in the bottom of the bunch with inspections of just 14.8 million bushels. This was down 30% from last week and brings the year to date tally up to 585.9 million bushels compared with the projected 900 million bushels. The weekly average would need to step up to 20.9 each week to meet than number.

Prices have settled down overnight but have certainly not collapsed. I continue to believe we have potential to extend this gains a bit more through the end of the month but unless we uncover a surprise piece of news, the upside remains relatively limited.

Grain and bean markets appear to have picked up right where we left off last Friday and have extended the mini-rally we are enjoying. Wheat seems to be leading the charge as concerns that the bitter cold temperatures being felt across the upper Midwest and the plains states could be damaging the winter crops but I suspect that is more of an excuse for the buying than a true reason. This is already a short week but also finds Mardi Gras, the beginning of Lent and the Lunar New Year in Asia, which could all contribute to further reduced volumes and the willingness to take risk off the table.

The independent Brazilian consultant Safras & Mercado released updated crop estimates over the weekend but the numbers fall right in line with other recent releases at 95 MMT for Brazilian beans. Cordonnier has boosted his projection for both Argentine corn and bean production by 1 MMT each. Harvest in the state of Mato Grosso is reported to have reached 25%. This will be a week of estimates as on Thursday and Friday, the USDA will be holding the annual Ag Symposium and will release the updated baseline projections. The monthly NOPA crush report will be issued later this morning with the trade looking for a number in the range of 163.5 to 164.5 million bushels.

Macros do not offer much in the way of direction this morning as equities, energies and metals are all a bit lower but so is the dollar. I have to believe that a reasonable portion of the current strength is technically driven, and while there should be room for additional gains, there would appear to be little in the news to stimulate an extended advance.

While there are some people who mistakenly believe that futures markets do little more than afford speculators a platform on which to bet on the direction of markets, the real purpose and value is of course to provide hedgers with viable tools in which a business’ risk can be offset or hedged at a centralized, financially secure arena with enough liquidity to absorb the volume of trade. We can leaf through the historical records and find any number of markets such as pork bellies, broilers or potatoes that no longer exists as they ceased to be effective hedging instruments for the actual buyers and sellers of the underlying products. Part of the function within this role for the futures markets is to reflect the underling supply and demand, partially via up and down movement in price but just as critically via the relationship between different delivery months. The larger the supply and the weaker the demand, the more incentive futures markets should provide to hold inventory, referred to as contango. Conversely, the smaller the supply and better the demand, markets remove incentive to store and will at times move into an inverted state, whereby technically you are being penalized to hold inventory. And of course ultimately the ability to make or take delivery of the physical commodity brings convergence between the futures and the cash trade. I recognize that there have been times whereby some of these relationships were distorted, such as with wheat in 2008, but once recognized, the industry has been relatively quick to address the problem and implement safeguards to protect the integrity of the process.

You are probably wondering why I am going through Hedging 101 this week. First, over the past few years we have transitioned once again from a tight, demand driven commodity situation to one of excess inventories and stagnant/declining demand so it never hurts to review the basics. But also the recent action and the current structure of the crude oil market is such a classic example of how this works, it seemed like and opportune time for review. As everyone is aware, we have seen prices for crude oil decline more than 50% over the past six months, driven by both waning demand via a slowdown in world economic growth but also due to increased production, exclusively through U.S. and Canadian shale oil production. In 2008, US shale production was around 600k barrels per day. By last year, production had reached a peak of around 4.7 million barrels per day. Note that according to the US Energy Information Administration, between 2005 and 2014, world production of crude oil increased by 3.5 million barrels per day, which would indicate that the rest of the world was losing on the order of 1 million barrels a day in production. Had demand been increasing by a like amount, of course prices would have remained intact. But according to most estimates, we were producing anywhere from 1.5 to 2 million barrels a day more than we consumed and hence the drop-off in price that we have witnessed. In recent history when the ebbs and flows of crude production were largely influenced by what was happening in OPEC nations or possibly Russia, overcapacity was largely regulated by Saudi Arabia. This time, they have no control over the production in the United States which forced them to change their philosophy and instead adhere to the old adage that the best cure for low prices is low prices, and it would appear to be working. It was reported this week that the US oil rig count peaked back in October at 1609 and has steadily declined since. As of the first week of February the number has dropped down to 1140, the lowest number since December 2011 and of the 469 that were taken out of production, more than half were horizontal drilling rigs which I understand are the most productive type.

In a round about way, this brings us back to the topic at hand, hedging and managing supplies, as the excess capacity needed to go somewhere if we were not burning it up. As of this past week it was reported that total crude inventory in this country had reached 417.9 million barrels which is the most we have had since records began in August 1982. One of the major storage points for crude here is Cushing, Oklahoma, which is also the delivery point for futures contracts. The total capacity at Cushing is nearly 71 million barrels and it is estimated that inventories have now pushed north of 41 million barrels; at the current pace it could reach capacity by April. Not only has this been reflected in the overall decline we have witnessed in price but also in the amount of incentive that the market is now offering to carry inventory into the future. The current premium for March 2016 crude oil over the spot contract is $9.56. The rate to rent storage at Cushing is less than $.50 per barrel per month which technically would leave $3.56 gain or a 6.75% return on your money, virtually risk free. While I am certainly not advocating that we should all rush out and lease oil storage facilities and fill them up as we all know there are always other “details” involved, you can be certain that those in the business are doing all they can to capitalize on the current scenario and more power to them.

We have several take aways from this short review of the crude market and hedging; the first being low prices may be trimming away at production, but because the industry has the tools available to provide incentive for storage, there is little concern of a massive reversal higher anytime soon baring a war in the Middle East or some such disaster. The second is, in my opinion, there has still never been a better system developed to provide the economic incentive to balance supply and demand than the futures markets and we are fortunate to have these tools at our disposal to help manage risk and lock in profit. Third, and possibly most import for us dealing at the farm level of risk management, during the post demand growth era, you need to re-educate yourself as to opportunities of using futures/options for true hedging purposes. Farmers are in a unique position in that, unlike anyone else in the marketing pipeline, they are always in a risk position so flat price is the Holy Grail. But let’s not forget that there are other opportunities available to help enhance returns as well. Understanding how hedging truly works and then implementing a program that tries to capitalize on the opportunities the marketplace offers is a key to this. Today, farmers are contending with unprecedented capital demands and as such unprecedented risks in their operations. That said, through revenue crop insurance, futures and option contracts and the multitude of derivatives the cash market offers, we also have unprecedented tools with which to address that risk. It is up to each producer to learn about and take advantage of these instruments. This is what we here are committed to helping you do each and every day.

While the overall news is generally quiet for the final trading day of this week, and a long weekend ahead to boot, grain and soy market are pushing a bit higher. If we were to close right now, spot wheat would be down 1 to 2 cents, corn virtually unchanged and beans up around 17 cents. One could say that pretty closely reflects the changes made on the supply/demand reports this week as wheat ending stocks were raised a bit and corn and beans lower. Of course, seeing that we remain within the same trading ranges that we have for the past month or better, it is also indicative of a market that lacks a new driving force.

On the international scene, overall weather remains favorable in Brazil and harvest continues to expand at a solid pace and as evidenced by both the USDA and CONAB, they will be producing another record crop this year. Over in Ukraine, a peace plan has been agreed to and a cease-fire is set to take effect over the weekend. Just how long this might last is another question but seeing that Germany, France and Russia are now all involved in the process, the effort could be more serious.

There was an interesting article I read yesterday that bares consideration in respect to the action in the soybean market over the past year, and potentially ramification into the future. According to Soren Schroder, Chief Executive of Bunge, the “shadow banking” system in China has potentially been distorting some commodities. Evidently these “financial players” as they were referred to can obtain favorable interest rates for the purchase of “strategic commodities”, of which soybeans have been classified under. The play as I understand it is to purchase the commodity for import, immediately resell it into the domestic market and then, instead of repaying the money, it is used to loan out on other projects at higher rates. Technically, this would mean the demand for the “strategic commodity” is being over exaggerated as they are really only interested in the financial arbitrage, not the fundamental of the underlying commodity. While supposedly the government in China has been trying to restrict maneuvers such as this, according to Mr. Schroder the activity in the past in his words “was significant enough to distort the market.” While there may not be any negative effects on prices if China has demand for all the beans they have been accumulating over the past several years but with their economy slowing and livestock numbers in decline, it is something to keep a close eye on. Evidently a similar play was made in nickel last year and once the play was stopped, they had to flood inventories of nickel back onto the world market and prices fell sharply. It does not matter what the market is when there is an artificial distortion, at some point we will always return to the actual fundamentals at hand and when the happens, it can often be painful for those holding the bag.

If yesterday was indicative of the type of trade action that we have to look forward to over the next few months, we could be in store for some pretty uninspired action in grain and soybeans trade. Corn struggled while beans and wheat bounced but realistically the overall action was directionless.

CONAB, the Brazilian counterpart to the USDA has issued update estimates this morning and lowered their bean production estimate 1.3 MMT to 94.6 MMT and trimmed the corn estimate by .7 MMT to 78.4. Certainly nothing shocking in these figures and compare with the USDA estimates of 94.5 MMT for beans and 75 MMT for corn.

The weekly EIA ethanol report reflected a slight pickup in the grind last week as we produced 282.53 million gallons of ethanol using approximately 101.6 million bushels of corn. While not as large a jump as last week, inventories grew for the seventh week in a row, this time by 6 million gallons to 887.67 million. The largest in over two and one-half years.

Export sales were solid for both corn and beans but again just so-so for wheat. For the week ending February 5th we sold 1,003,100 MT or 39.5 million bushels of corn which compared with trade expectations in the 600 to 850k MT range. This number was 19% higher than last week but still 17% below the 4-week average. While a good number, there was certainly nothing out of the ordinary in the customer lineup as the top three purchasers were Mexico taking 427.9k MT, Japan for 172.8k MT and Columbia with 71.6k MT. Bean sales were 52% higher than last week and 29% above the 4-week average at 745,400 MT or 27.39 million bushels. As has consistently been the case on weeks of big sales, China was the standout purchasing 603.3k MT or 81% of the total, followed by Indonesia taking 82.1k MT and then Germany for 70k MT. Wheat sales were up 3% from last week and right in the middle of expectations at 409,400 MT or 15.04 million bushels. The top purchasers were unknown destinations at 128k MT, Taiwan at 55k MT and Japan taking 51.1k MT.

Winter has returned to a large swath of the US and is forecast to hang around for at least another week but should have little to no impact on markets. From the information that I read, it would appear that a number of members on the House Ag Subcommittee voiced support for crop insurance when Secretary Vilsack was there yesterday and expressed that they were not pleased with the suggestion by the White House to target cuts, particularly in face of the 43% cut in net farm income over the past two years. Kudos to that leadership. There does appear to be growing interest on what could come forth from Annual USDA Ag Forum to be held next week in Washington. Of course that could be indicative of the fact, we have little else to focus on between now and the end of March. I will be in attendance at the meeting and will plan to relay information via tweeter.

I have pointed out many times in the past that when markets respond in a contradictory fashion to the news at hand, it is often a warning sign as to the undercurrents of the market and yesterday would appear to have been a prime example. Granted, we had witnessed a minor rebound leading up to the supply/demand reports issued yesterday but there would appear to be no denying that prices ultimately reacted negatively to what would at least on face value be positive news. By no means am I suggesting the response created any major sell signal for the grain and soybean markets but I believe it does reflect the very tepid interest in commodities in general at this time. It would seem that the attitude from investors is give me a disaster and I might be interested in committing money but outside of that, I am not interested.

As a quick recap of the report, domestic corn ending stocks were decreased 50 million bushels via a decrease of 25 million in feed/residual usage and 75 million increase in ethanol production, with everything else left unchanged. This leaves us with a comfortable 1.827 billion bushel carryout, which is still 48% higher than last year and 122% higher than 2012/13. World ending stocks were raised just under .50 MMT primarily due to a boost in the Ukraine production number. Soybeans also witnessed a cut in the ending stocks estimates as both crush and exports were boosted by a combined 35 million bushels but after a boost in the import category of 10 million, carryout was reduced a net 25 million to 385 million. Here again, it was a number lower than the trade was expecting and for a while it almost appeared to stabilize the market but it would appear the overall enormity of the inventories worldwide ultimately prevailed. Domestically the carryout is 4-times higher than a year ago and 2.7 times higher than 2012/13 and globally, even after a reduction of 1.52 MMT for the ending stocks, at 89.26 MMT it is still 24% higher than the previous record set in 2011. In case you were wondering, the USDA did cut the Brazilian crop 1 MMT but raised Argentina by a like amount. Finally on wheat the net changes were rather insignificant but the price response was no different. Imports into the US were lowered 20 million but exports taken down 25 million placing the ending stocks at 692 million. This number is 17% higher than last year but 3.5% lower than 2012/13. Globally, ending stocks were increased 1.85 MMT to 197.85 via a few production tweaks. While the largest carryout since 2012, it is in a range we have seen many times before in the past.

Adding to the negative reaction and psychology of the market right now is the possibility that the Ukraine may be close to working out a peace accord with the separatists (Russia) and of course the expanding harvest activity in South America. While beans could be the exception, I do not believe there is anything in this news or in the failure yesterday that would suggest we are ready to embark on a new bear swing but the action reinforces the idea that our markets should be facing headwinds at least until we reach out towards the growing season.

Of more immediate concern, as you are likely aware, President Obama singled out crop insurance for potential budget cuts this year and this week hearings are being held in Washington in front of the House Ag Subcommittee. I believe Secretary Vilsack is scheduled to appear today. There is no time like the present to contact your representatives and voice support for this critical component for risk management in US agriculture.

The corn market managed to close at the highest level in nearly a month yesterday but overall the action was really pretty uneventful. Wheat and beans did manage to close higher as well but were still contained within recent ranges and I have to suspect the strength was little more that short-covering in front of todays report. The most recent estimates I have look for corn ending stocks to come in at 1.871 billion with a range of 1.817 to 1.957. The guess for beans is 402 million with a range of 360 to 440 and for wheat the average estimate calls for carryout of 685 and a range of 595 to 712. As with all reports, there is always the potential for a surprise but it is difficult to imagine where than might come on this one. Note that there was a private estimate by Ag Rural released yesterday predicting a Brazilian bean crop of 91.9 MMT versus the current USDA estimate of 95.5 but with the US report today and CONAB releasing numbers on Thursday, no one took much notice. Regardless, that would still be a record crop.

Export inspections all fell within expectations. For corn, we loaded 27.6 million bushels which 6% above the previous week and 7% ahead of the 10-week average. That said, this bring YTD inspections up to 588.36 million and to reach the USDA projection of 1.750 billion over the next 40-weeks, the average needs to push up to 40.1 million. YTD average is 25.6. Beans inspections were the lowest in the past 5-weeks coming in at 54.6 million bushels. This figure was 12.5% below last week and 14% below the 10-week average. YTD we have loaded 1.377 billion bushels which is almost 78% of the projected total and means we need to average 13.6 million per week for the balance of the year to meet the target. Wheat inspections slipped just over 4% from the previous week but at 14.6 million were 19% ahead of the 10-week average. YTD we have now loaded 555.7 million bushels but need to see the weekly average pick up to 23.1 to reach the projection of 925 million. To date we have averaged 15.4 million.

Macros lean negative this morning as we have energies and metals weaker and the simmering problems in the Ukraine and again with Greece have people looking for the relative security of owning dollars. I continue to hold a near-term up bias for corn and wheat especially, but am not expecting to see anything that would qualify as more than a corrective bounce.

We have begun our new week with two sided, somewhat quiet trade. Last week corn did manage to gain nearly 17-cents, erasing the previous weeks loss, spot wheat posted a 24-cent advance and beans added just over 12. It would appear that a decent part of the strength came via fund short covering and it is difficult to sustain strength on that kind of buying.

Economic news from China is not doing anything to help bolster prices as over the weekend, import and export data was released. For the month of January, total imports into China were down 19.9% and exports lower by 3.3%. While still a very positive trade balance for that country, it would appear to reflect the slowdown in their overall economy. All that said, this morning the USDA did announce sales of 120k MT of beans to China this morning for the 2014/15-crop year.

For anyone who would discount the wisdom that the best cure for low prices is low prices need only look at the news coming from the energy sector. It was reported on Friday that the total number of active US oil and natural drilling rigs has dropped down to the lowest level in nearly five years. The count is down almost 18% from a year ago. I read as well that in Latin America, the number of rigs drilling has dropped from 339 as of July last year to 272 in January, a nearly 20% drop. It was these types of reports that help crude rebound from the sub-$50 levels last week. I suspect we should have lows in place but it is difficult to imagine substantial gains for sometime which should continue to hang over the ethanol industry.

I suspect we should not see much feature in markets at least into the release of the reports tomorrow and it would be a bit surprising if the USDA made many changes on this report. The latest estimates released by the WSJ have ending stocks estimates of; 1.871 billion for corn, 402 million for beans and 685 million for wheat. Following just a couple days after these numbers, CONAB will release updated estimates for the Brazilian crop so we should have more than enough numbers to digest over the next few days.

I have watched with amusement the conversations and comments that have erupted since President Obama released the White House 2016 budget recommendations this past week. As one would expect with a Republican controlled Congress and Democrat controlled White House, the usual partisan rhetoric quickly took center stage with the left accusing the right of coddling the wealthy and big business and the right accusing the left of promoting populist distributism. While there is a certain amount of truth in both statements, the purpose of the proposed budget is little more than a means to stake out the political territory from which each side can then draw up its plan of attack. Ultimately, the White House does not make the budget—that is the job of Congress. But of course the very public announcement of the numbers, always with several “hot button” items to delineate the philosophical divide, gives voters something to rally around. As entertaining as all of this may be, I believe it is the things that are not highlighted or discussed that are the most interesting and realistically the most telling as to the willingness of politicians to attack the long range issues we confront in the country. These problems were actually underscored the previous week in the less politically motivated Congressional Budget Office projections.

This report pointed out the tremendous strides that the US economy has made over the past several years and the budget deficit has worked down to just below 2.6% of our countries economic output, which in turn is just below the average for the past fifty years. Positive news indeed. In the fiscal years 2009 through 2012, the annual deficit was more than $1 trillion each year, and as a percentage of output was closing in on 10%. Beginning in 2013, the number dropped to a $680 billion, then $483 billion in 2014 to a projected $468 billion now for 2015. According to the CBO, this number is projected to edge lower yet into fiscal year 2018, certainly never reaching a budget surplus. An improvement, but we are just not digging to hole as rapidly as we once were. But moving forward from there, we see the deficit begin to climb once again. Why the turn around? It is not primarily due to the ag budget or defensive spending nor the desperately needed funding for infrastructure in this country, it is projected to begin increasing due to the rising costs of retirement and health-care programs as more and more baby boomers retire. Keep in perspective as well that the projections are predicated on an expanding GDP and historically low interest rates, not to mention the fact that we are still dealing with deficit that will never dip below $400 billion dollars. These are difficult projections to swallow.

So far at least, this seems to be the long-term piece that remains absent from the discussion and the rhetoric. We can debate about who is favoring whom or how the rich should be taxed ad nauseam. While this is not to say these are not important topics to hash out, they are still distractions from the real issue of reforming entitlement programs and a complete reform of the convoluted tax system in this country, something I believe should be a priority. Maybe that is too much to ask of politicians who rarely look beyond the next election cycle and a general populace that seems to only react and demand changes once backed into a desperate corner. Right now many of these issues seem to fall into the category of out of sight, out of mind. For example, last year Congress voted to suspend the federal debt limit until March 15th of this year and gosh, if we are lucky with current tax revenues rolling in, we may not have to begin debating that topic at least into the fall. That is a long time in political years. But as the CBO’s projections show us, without someone being willing to step up and talk about the hard decisions in the short term, someone else will be forced to do so in the future.

The wheat market led the recovery in the grain and soy markets on Thursday spurred on partially by rumors of Egyptian interest in US wheat. While not impossible, it would still appear improbable at this time seeing that European wheat remains the most cost effective. If correct, that would suggest the strength was more a function of the generally oversold condition of commodities in general and a weaker dollar, which would not be enough to sustain an extended advance.

Soybean harvest in Brazil continues to advance rapidly. In the state of Mato Grosso harvest is now estimated to be approaching 12% complete and in Parana around 10%. Dry weather has actually caused farmers to delay planting of the Safrinha corn but moisture is the forecast next week and beyond.

Overall news is generally sparse here as we complete the first week of February and we could very well tread water now as we await the supply/demand report to be released next Tuesday. As I commented yesterday morning, the February report generally contains few surprises but you can never discount the possibility that a curve ball could be delivered. Trade estimates are as follows; Domestic corn ending stocks 1.879 billion, bean ending stocks 400 million and wheat ending stocks at 689 million. For the world report, the average estimate for corn is 189.3 MMT, beans at 90.4 MMT and finally wheat at 195.8 MMT. There is little change in any of these figures versus January.

I continue to believe wheat, corn and beans have potential to remain in a sideways to positive correction through the balance of February but without a surprisingly positive fresh piece of information, I suspect we will be paddling against the current. If correct though, one of the major benefits for producers would be generally higher prices as we move through crop insurance pricing period. There are only 19 trading days for the month and with the first four behind us, we have average prices of 4.12 for corn and $9.58 for soybeans.

Markets appear to have shaken off the case of the blues they suffered from yesterday and we have witnessed a general rebound overnight. Energies and grains are higher this morning and the dollar is weaker and if we hold that pattern into the close, I believe it should confirm that we have broken the back of the bear for now. There is one sector that has not been able to escape from the clutches of the bear and that has been livestock, but even there, I have to believe that we are nearing what should be a significant low.

You may have seen the stories overnight but the Chicago Mercantile Exchange confirmed plans for the inevitable. As of July 2nd of this year and after nearly 150 years, pit trading for most futures contracts will cease. There will continue to be open outcry pit trading for options as well as continued futures trading in the S&P 500 but outside of this, everything will be electronic. While many of you will no doubt notice nothing different and I am sure there are a few who cheer on the demise of the pit but this is truly the end of a major era. There is probably no other image that embodies free trade and capitalism more so than traders standing toe to toe haggling over prices but of course pit trading is not the first, nor will it be the last activity that has been pushed to the wayside due to technology.

The weekly EIA ethanol report did not provide the corn market with anything to cheer about. Production of ethanol dropped just over 3% to 278.71 million gallons but inventories still climbed 15 million gallons. Two days ago, ADM’s President and CEO said that the current conditions of low cost oil, narrowing to negative margins and climbing inventory will spur “some rationalization of capacity” within the industry. Of course than means a cut back in production and of course corn usage. On top of that there is currently a bi-partisan group of lawmakers that are trying to introduce a bill to eliminate the fuel-blending mandate under the Renewable Fuels Standards reform act.

Export sales did not provide us with anything to write home about this past week. The numbers were not bad by any means but all slipped from the previous week. For corn we sold 844,900 MT or 33.3 million bushels. The figure was 12% below last week, 22% below the 4-week average and 12% below the 10-week average. The best purchasers for the week were Mexico with 297k MT, Columbia taking 154.8k MT and then South Korea for 116.1k MT. This brings the year to date total up to 72% of the projected 1.75 billion bushels. With 30 weeks left in the marketing year we will need to average just 16 million per week. Soybean sales were down 35% from last week coming through at 489,700 MT or 18 million bushels. This figure is also 27% behind the 4-week average and 33% under the 10-week average. China was still at play purchasing 225k MT, followed by Turkey taking 81.8k MT and then Japan for 81.4k MT. For the marketing year we have reached 94% of the projected 1.77 billion bushels. Wheat sales came through at 397,700 MT or 14.6 million bushels. While this figure was down 27% from last week it was 11% above the 4-week average and 7% above the 10-week average. The top three purchasers were Mexico taking 107.2k MT, Thailand with 55k MT and then Japan for 51.7k MT.

While I suspect the report will be a non-event, next Tuesday the 10th will be the February USDA supply demand report. We will look at additional estimates tomorrow, but the latest I have seen look for ending stocks of 1.879 for corn, 398 for beans and 689 for wheat. The Hueber Report estimates are 1.890, 400 and 695.

After basically 30-days of pressure in the grain and soy markets and realistically seven months in a bear trend for commodities in general, of course headlined by crude oil, markets were sitting in a very oversold situation leaving us ripe for a corrective rebound. All that was lacking was a spark to panic the bear. While I cannot point a finger at a specific news story that touched off the buying spree yesterday but you do not have to search far to find a number of stories circulating recently about potential declines in the production of oil worldwide and the old adage that the best cure for low prices is low prices was being touted with regularity. As is often the case when everyone is thinking the same way and the boat is listing heavily to one side, the reaction can be quite violent when it occurs and that became reality yesterday. In the Ag’s, funds are estimated to have purchased 25,000 contracts of corn, 14,000 bean, over 5,000 wheat and meal and around 2,600 oil.

As impressive as the rally was yesterday, there appears to be little to sustain the values here this morning. World cash markets have backed away from the rally and many believe Brazil used the bounce as an opportunity to pick up sales. Part of the driving force was strong energies and a weaker dollar and neither has seen follow-through overnight. Technically the bounce yesterday has turned a few indicators higher but we may have already seen a large portion of the gains, particularly in the case of beans and could see prices move into more of a sideways pattern once again.

Informa did release updated South American crop estimates yesterday but certainly did not post anything outside of other recent estimates. They place the Brazilian bean crop at 93.5 MMT, which was unchanged from their previous estimate and project a 57 MMT crop in Argentina, up 2 MMT from previous. Interestingly enough, while the split between the countries is different, to total of the two is identical to the numbers the USDA published in January. For corn, they project a 72.8 MMT crop in Brazil, up 550k from their last estimate and 23 MMT from Argentina, up 1 MMT. This gives us a combined 95.8 MMT production compared with the January USDA number of 97.

The only scheduled report today will be the weekly EIA ethanol production but of course tomorrow morning we get a look at export sales once again.

As I commented previously, the rally yesterday does help turn a few technical indicators positive but the sharpness of the advance may have already eaten up a large share of the possible gains. At a minimum, this should help stabilize prices for the time being but there appears to be little that would make this anything more than a corrective bounce.

Wheat continued to struggle yesterday and corn and beans barely held their heads above water but we have now witnessed a nice bounce in the overnight trade. I suspect this strength has to be viewed in the context of a general commodity bounce as we have energies higher, with crude poking back above the $50 mark and the dollar under decent pressure. The one exception here is gold which is lower this morning as the slowing world economy and non-existent inflation provides the bulls over there with little to hold onto. At this point it is tough to say if this is anything more than a Tuesday undo but I continue to believe we have pressed prices low enough at this time to warrant a corrective rally.

Export inspections for beans yesterday were solid as we came in over 11% above the previous week and well above trade estimates with 62.4 million bushels. This almost brought us back to the 10-week average of 65.8 million and brings year to date inspections up to 1.377 billion bushels or 77.7% of the projected total. With 30-weeks left in the marketing year that means we will need to see an average pace of 13.1 million per week. Not surprisingly, 73% of the beans loaded last week were headed for China. The corn inspections were less than inspiring at 26.1 million bushels, down 25% from the prior week and right on the 10-week average. Year to date we have reached 588.36 million bushels, which is a little over 2% ahead of the pace last year but we need to see the number move up to 38.7 million per week for the balance of the year to reach the 1.75 billion target. Wheat posted the largest inspections in six weeks at 14.5 million bushels. This number was almost 50% higher than the previous week and 24% ahead of the 10-week average. Problem is, with 17 weeks left in its marketing year, we need to see this average push up to 21.7 million weekly.

On the other end of the globe, the US attaché in Brazil updated bean production estimates and projected a crop of 93 MMT. Reflecting the dry conditions in the Northeastern part of the country, this number is down 2.5 MMT from their last estimate and would be 2.9 below the last USDA figure. Certainly no shocks from this number and at the end of the day, if we end up with a world carryout of 88.2 MMT versus the current 90.78, it would still set a new record by over 16 MMT and would be nearly a 31% stocks to usage ratio. Hard to build a lasting bull case with those kinds of numbers. Informa is scheduled to release updated world numbers later today and Stats Canada provides updates tomorrow.

Winter finally arrived to portions of the upper Midwest and we here in Northern Illinois ending up with accumulations of around a foot yesterday. It does not appear that you have to travel too far south and the storm produced rain instead of snow but of course compared with the winter of 2013/14, this year has been quite tame so far.

Today is the first trading day of a new month and more importantly for farmers in the upper Midwest, is the first day we begin tracking prices to set the spring values for revenue insurance. We did open lower overnight but bounced back into positive territory sometime after 5:00 AM. More importantly, the challenge now will be to try and hold strength into 1:15.

There would appear to be little in the news to influence either the bull or the bear other than generally favorable weather continuing in South America. Funds were sellers throughout the last week, part of which could be attributed to end of month liquidation but the general attitudes for commodities has been one of liquidation of course led by the energy markets. This morning we actually find crude and heating oil trading higher and this building on a rally last Friday. Hard to call this anything more than a dead cat bounce at this time but as they say, a journey of a thousand miles has to begin with one step. The rest of the outside markets are just a mixed bag this morning. Equities have seen two-sided trade as has the dollar but it is currently in negative territory as are bonds, notes and metals.

I would like to believe that we have pushed corn and wheat down into levels of value and that beans are technically oversold enough to at least warrant a short-term technical rebound. If we can stabilize over the next few days, I suspect we should be in line then for a bounce higher at least through the balance of the month and possibly into March as we then begin to focus on the quarterly grain stocks and the Prospective planting reports.

It seems that it was only yesterday that commodities were the place to be. Diversification into non-correlative investments was the buzzword and money appeared to be pouring in from any and all sectors. Well, that was yesterday and today with non-existent inflation and growing world inventories we have been shunned by the investment crowd as they search for better returns in other pastures. Yesterday Goldman Sachs once again cut their commodity forecast, moving from a neutral to negative stance as they believe the sector continues to hold downside risk at worst and little to no upside potential at best. Granted, the performance and outlook in energies has weighed heavily on this but regardless, this translates to fewer dollars offering support for the entire basket.

All that said the performance across the floor yesterday was not bad. Yes, we did dip into lower lows but both corn and wheat rebounded from there into the close and we have seen prices shore up now during the overnight trade. While there is nothing in the action yet to suggest we have a low in place with indicators very oversold and a cluster of cycle dates lining up here at the beginning of February, I believe we should be very close.

There would appear to be little within the news to stir the hearts of buyers. French wheat prices rallied yesterday, which helped our market rebound but they remain as the lowest cost provider in the world right now. For corn, Ukraine currently holds the title and outside of our traditional buyers, should garner much of the world trade for the time being. As we know, there is more than an ample supply of beans in both North and South America and with harvest expanding in Brazil, they are bracing for record export numbers. Note that over the past three years, Brazil has invested heavily in beefing up their port capacity and general infrastructure. Long-term this could be a real issue with our competitiveness as the United States has done little to modernize ours. We are trying to compete in the 21st century with 19th century infrastructure and I have to believe at some point, this will turn around and bite us you know where.

As a contrarian, when I see the negative press that surrounds the commodity world right now it does make my ears perk up as we appear to be reaching that point once again where everyone is thinking the same way and of course right now that is negative. While not enough to call for the resumption of a bull move, I do believe we could be very close to seasonal and cycle lows for a number of commodities and should have the potential to build a little risk premium back into prices between now and spring.

With wheat leading the retreat, Wednesday turned out to be a pretty miserable day for the grains with beans not following too far behind. Realistically with no threat to winter wheat crops around the globe and basically a known supply, the only driver is new demand and we have nothing out of the ordinary that is occurring there. It is interesting to note that new corn and beans are not being pressured quite to the extent of old so evidently the trade is willing to maintain a little risk premium in those months ahead of the next growing season.

The weekly EIA ethanol production report was issued yesterday and as has been the case, the grind remains solidly consistent but stocks continue to build. For the week ending January 23rd we produced just over 278 million gallons of ethanol, which should equate to around 100 million bushels of corn. For the fifth week in a row through the inventories climbed, this time by 10 million gallons to 866.5 million, the highest stocks in over two year. Blenders remain behind the eight ball and with the summer driving season a few months away, it is difficult to imagine this situation improving anytime soon, which could lead to a cut back in production.

Export sales were reasonably supportive this morning. We sold a total of 544,400 MT or 20 million bushels of wheat. This number was up 19% from last week and is 74% above the four-week average. The top purchasers were unknown destinations taking 122.3k MT, the Philippines with 95.5k MT and Thailand taking 60k MT. In corn, on the heels of the marketing year high a week ago we posted a very respectable 1,068,200 MT or 42 million bushels. The top purchasers were a very familiar lot with Japan buying 440.1k MT, Mexico taking 221.7k MT followed by South Korea with 181.1k MT. After posting a marketing year low last week, beans bounced back with sales of 888,200 MT or 32.6 million bushels. All it took was to have China back as they secured 548.9k MT, followed by Germany with 144.3k Mt and then the Netherlands at 119.7k MT. There have been rumors circulating all week that somewhere between 1 and 1.1 MMT have been canceled recently but on this report there were only decreases of 232.7k.

Overall, I continue to expect that we will find a seasonal low in the grain and soy markets here around the beginning of February. If correct, by no means would I expect to see a any bull trend developing but should have potential to rally within existing ranges into March.

There is an old line of sarcasm that says if I did not have bad luck, I would not have any luck at all. It would seem we could paraphrase that for the grain and soybeans markets right now and say that if we did not have bad news, there would be no news at all. It is not that there is anything overwhelmingly negative but nothing that would entice much fresh buying to return, particularly with an end of a month nearing.

In beans, weather conditions in South America remain generally conducive to finishing out what should be another record production year and yesterday, the USDA announced another cancellation of 120k MT of old crop beans. Export sales tomorrow morning could be revealing. Funds were estimated to have sold another 5,000 contracts yesterday. To add to the negative psychology, it was announced that the EPA has approved and Argentine application to qualify for the Renewable Fuels Standard program so, bio diesel imports could be approved. In grains, competition in the international market continues to remain stiff. Ukrainian corn continues to be priced below US Gulf values and wheat continues to be competitively prices and available from a number of countries.

While all of this sounds pretty dire for the moment, I do not believe we should be staring at extended pressure from here. With much of the risk premium now removed from prices and the uncertainly of demand, acreage, weather etc., I suspect we should see prices, particularly for corn and wheat begin to stabilize and potentially rebound but that said, as I have commented previously, we could be in store for months of sideways trade action until a new story is formed.

It would appear that we have very featureless trade in the overnight session. Beans have not really surrendered much of the yesterday’s strength nor have corn or wheat extended lower. It is difficult to really put a finger on the higher bean trade yesterday. Some have pointed to the dry conditions in northeastern Brazil, others a liquidation by money from the eastern US as they brace for the winter storm and still others looking at stronger meal. While I suspect a combination of all of the above, we did not even quite reach back to key overhead resistance nor do I see many reasons that we should.

Cordonnier released updated South American crop estimates yesterday reducing the Brazilian bean estimate by .5 MMT to 93 MMT and raising the Argentine estimate by 1 MMT to 56 MMT. For corn he left both the Brazilian and Argentine numbers unchanged at 74 MMT and 22.5 MMT respectively. The USDA attaché in Argentina lowered their estimate for the corn crop .5 MMT to 22.5 as well. While there are still a few trouble spots in Brazil and on occasion someone will use that as an excuse to buy beans, we are now late enough into the season, particularly in lieu of the weather outlook, that there should not be enough damage to make a significant dent in the Brazilian crop. It will be a record and the world supplies will climb to new records by a significant amount.

It is the season when projections begin to emerge for the upcoming year and The Congressional Budget Office released their acreage estimate for 2015 and come up with corn at 89 million acres, beans at 86 million and wheat 55.5. According to their release this would equate to a corn crop of 13.496 billion, beans at 3.829 billion and wheat at 2.136 billion. Comparatively last year we planted 90.6 million acreages of corn producing a crop of 14.216 billion, 83.7 million beans and a crop of 3.969 and 56.8 million wheat producing a crop of 2.026 billion. The next real government projection will come in late February when the USDA holds the annual Agricultural Outlook Forum. I will be attending this event and will report news as it is released.

We did post decent export inspections for corn and beans last week but wheat continues to drag. For corn we loaded 34.9 million bushels, bringing the year to date shipments up to 562.3 million. To reach the target of 1.75 billion we need to average 38.3 million moving forward. For beans, the number was identical to the previous week at 55.9 million bring the year to date tally up to 1.312 billion. This is 74% of projected and we need average just 14.8 million per week moving ahead. Wheat slipped back to 9.7 million bringing the marketing year tally up to 539.17 million bushels. To reach the target of 925 million we need to see the average step up to 21.4 million per week. Export sales on Thursday morning could again be very interesting as there has been quite a bit of discussion concerning additional cancellations of bean by China.

I continue to look for prices to trade basically defensively into the first week of February and if correct we could be looking at seasonal lows at that time.

We are beginning this final week of January with flat to lower trade and very little fresh news to provide direction. The biggest weather story of the morning is the forecast for a possible record setting winter storm that should hit the east coast and while that should not be a major influence on Ag markets, it could have an impact on money flow into and out of all markets.

In Brazil the bean harvest continues to edge forward and I read that in the state of Mato Grasso we have reached the 7.7% complete mark, which would be almost 2% above last year. Nationwide it is estimated they are at the 4% mark. As you might expect, there is quite a bit or variability in yields but reports from Mato Grasso, which is the largest producing state in that country continue to suggest higher yields than a year ago. Rains fell across a wide swath of that nation over the weekend with forecast for additional moisture this week but the northeastern region remains short. Temperatures have not been excessive. In Argentina there has actually been some reports of damage from too much moisture but according to Rosario Board of Trade, 51% of the bean crop is rated very good and 32% rated excellent.

The Cattle on Feed report issued Friday was slightly positive for cattle and hence slightly negative for grains. Total on Feed came in at 101% versus the estimate of 101.6, December placements were 92% of a year ago compared with the expected 95.9% and Marketing’s were at 95%, which was basically right at trade estimate. On the commitment of traders report we see that funds are now net short around 7,700 contracts of futures in beans and have reduced their longs in corn down to just under 13,000 contracts in futures.

Outside markets are not really providing much for direction either. Equities are soft, energies mixed, the dollar a bit higher and the metals weak. Seeing that after the Greek election last weekend it would appear there is little risk that they will exit the European Union, the gold bugs saw little reason to hang on.

I continue to believe we should see prices struggle in a sideways to lower pattern now through the end of the month. If correct, ideally we should then have a seasonal low in place for a possible rebound through the insurance pricing period and potentially into early spring as we try and rebuild a little risk premium back into prices.

There was plethora of economic releases and news this past week, most of it concerning the outlook for other countries. Unfortunately, none of it was very encouraging. I have to believe the most disconcerting news comes via China; the economic juggernaut that has provided the fuel for growth in so many other countries and the commodities sector continues to lose steam. For more than 30 years, China averaged more than 10% growth annually but has been slipping post-2010. In both 2012 and 2013, their GDP expanded by 7.7% and in 2014 grew at 7.4%. At first glance, with the US economy struggling to expand by 3%, the EU and Japan teetering on the brink of the returning to recession, and Russia already there, an expansion of 7.4% does not sound too alarming. But by their own calculations, China needs to maintain at least a 7% growth rate to keep employment stable. The slowdown has been primarily attributed to a slowdown in investments in fixed assets, namely manufacturing and real estate. For years we have been hearing stories about the overbuilding in the real estate sector of the country as newfound wealth often has few other options for investment. While there was still a 10.5% growth in investments in real estate, property sales were down 7.6% for the year and unsold floor space increased by 26.1%. Sounds eerily familiar to the United States pre-2007.

For much of the 20th century, the metaphor “when the United States sneezes, the rest of the world catches cold” was often used, and it would seem that the same could be applied to China at this point. We are familiar with the drive China has given the commodity trade especially in countries such as Australia and Brazil, but they have increased automobiles sales from the US and Europe and so much more as they have been one of the major growth drivers in world trade. As they slowdown, the telltale effects appear rapidly. In a separately released report, the International Monetary Fund downgraded the forecast for world growth, cutting it .3% to 3.5%. They actually project that the United States will expand by 3.6%, which is .5% higher than previous forecasts, but trimmed Europe and Japan by .2% to 1.2% and just .6% respectively. Brazil, one of the major beneficiaries of the commodity boom in the early part of this century and the B in the acronym BRIC nations, had its forecast for growth cut down to just 1% after projections of 2.7% six months ago.

Thankfully, the U.S. economy is still rich in natural resources, and large and diverse enough that we should not feel the impact of other nations as much when growth slows. But for those of us in businesses that are heavily influenced by export trade, there is the negative side to our position—the rising dollar. Already on a six month rally, this was exacerbated this week when Mario Draghi and the European Central Bank borrowed a page from Ben Bernanke’s manual and announced plans to pump €60 billion each month into the economy of the EU in an effort to stimulate growth. While the plan itself was largely anticipated, the size was not and the announcement sent the US Dollar up to the highest levels seen in over a decade.

One of the great things about being in the business of producing food, no matter what the economy looks like or what the value of the currency is, people have to eat. We can cut back on the purchase of some things, but historically, many a leader, or ex-leader, has learned that the quickest route to a revolution is via empty stomachs. This does maintain a certain amount of stabilization for the need of our product. But in an era of very adequate to excessive world inventories of grain and a slow down in economic growth, it would appear to be a recipe for continued stagnation in the prices for our products as well.

Thursday turned out to be another long liquidation exercise and while we have not pushed into new lows for the swing in corn, beans and Chicago wheat, we are teetering on the edge of the doing so once again. The breakdown yesterday in no little part can be attributed to move by the European Central bank. While it was anticipated that the bank would begin a Quantitative Easing program, the announcement by President Draghi to pump €60 billion into the EU economy was larger than expected and quickly pushed the Euro lower against the dollar. One could argue that the strength in the dollar is primarily a psychological market factor at this point but regardless, at a time of adequate to excessive world supplies for grain and soy inventories; that can still be a significant market influence. The strength in the dollar yesterday and again overnight has pushed it to levels not seen in over a decade.

The weekly ethanol report provided nothing shocking but neither was there anything positive to talk about. For the week we produced 287.826 million gallons using around 103.5 million bushels of corn but inventories grew another 7 million gallons to 856.25 million, the highest in over two years. Granted, that was not as large a build as the previous few weeks but with blenders running in the red and crude oil trading sub $50 it is challenging to put a positive spin on that.

The International Grains Council released updated world estimates yesterday. For corn they are now projecting a record production of 992 MMT. This is up 10 million from their last estimate and 1 million from last year. Note that the increases all came from outside of the United States. They have world wheat production pegged at 717 MMT, largely unchanged from the last estimate but up 4 MMT from last year. Soybeans production is projected to reach 312 MMT, up 4 MMT from the prior estimate and a whopping 28 MMT or basically 10% above the previous year. As I commented in the initial paragraph, a sharply rising dollar combined with growing world inventories would not seem to equate to projections for sustainable price strength for our markets in the months ahead. Note that already we have seen Ukraine corn values driving lower so competition should be stiff from the Black Sea in the months ahead.

Having said that, export sales for corn this past week were exceptional. For the week ending January 15th we set a marketing year high of 2,185,400 MT or 86 million bushels. The trade was expecting a decent number this week but this was over twice the highest estimates. The top purchasers were unknown destinations taking 483.7k MT, Japan purchasing 426.3k MT and South Korea with 369.8k MT. At the other end of the spectrum we have soybeans which set a marketing year low for sales at 14,100 MT or 5.18 million bushels. The top purchasers were Russia with 83.2k MT, the Netherlands with 77k MT and Mexico for 65.7k MT. We have maintained for sometime that once China wrapped up the buying program the numbers would look pretty dismal and the only place that China showed up on the report this week was via cancellations. Last but not least we have wheat with solid sales. The net came in at 458,400 MT or 16.84 million bushels. The top buyers were unknown destinations taking 92k MT, the Philippines with 80.6k MT and Nigeria for 61.2k MT.

It would appear that we are confronted with a near void of information to look at this morning, particularly concerning the corn and bean markets. Wheat is looking a bit tense again concerning the situation in Ukraine. At this time commodity pages appear to be more concerned with crude oil, European Central Bank stimulus programs and the financial world’s “must been seen at” annual summit in Davos Switzerland. As far as outside markets this morning, we have equities and energies higher and the dollar and metals lower so they provide little to work with as well.

Export sales are pushed back to Friday morning due to the holiday but the USDA did announce sales of 176k MT of beans to China yesterday. This of course just partially balances out the cancelations over the past few days. EIA weekly ethanol production numbers will be released later this morning with the trade expecting to see the grind a bit lower but stocks building again.

The South American weather forecast continues to look favorable with moisture in the picture for Brazil over the next several days and then later next week for Argentina. Early harvest continues to expand but yield reports from Parana have been slightly disappointing. That said, as the beans come off, planting of the Safrinha (second crop) corn has begun with Mato Grosso reporting 1% planted at this point.

While I do not suspect it will be a major influence for the grain markets, we will also see a Cattle on Feed report issued tomorrow afternoon. The average estimates are as follows; Total on Feed 101.4% of last year, Placements at 95.7% and Marketing’s at 95.8%. This market could certainly use an injection of positive news after the recent flush.

At this point in the morning, with the exception of bean oil, all grain and soy market remain higher but the action appears pretty lifeless. I believe that wheat should be the market that finds value first followed by corn with beans still a big question mark. For all the above though, I suspect we could look at additional long liquidation between now and the end of the month.

It appeared that the watershed moment in the bean market yesterday occurred when it was announced that China cancelled another 175k MT of bean purchases from the United States. This makes a total of 460k MT canceled in the past two days and who knows how many origin optional sales are now being shifted to South America. We have discussed for sometime that the sole positive influence in beans has been the relentless purchases from China and it appears that has come to a head. As is often the case, news such as the softening economy in China and more importantly, reports that the hog herd there is at the lowest inventory in six years that were largely dismissed previously are now brought into focus and add to the negative psychology that appears to be expanding for this market. Prices currently sit on the edge of tipping over the cliff and it would probably not take much to push them over at this point.

Actually the corn and wheat markets do not look as feeble at this time, which is understandable with the overall picture. Wheat again appeared to find support from rumors that Russia will be limiting exports in the months ahead. This is hardly fresh news but nevertheless, reduces one of the negative factors. More importantly I believe is the fact that world grain stocks are very comfortable but by no means burdensome. When you look out into this next year with the possibility of lower corn acreage and the poor financial situation in Ukraine and Russia with the possibility that inputs could be cut, we would have to have a near perfect weather year to not trim inventories. At this point, that may not be enough to entice a rally but I suspect it should keep the bears somewhat in check.

Releases have all been pushed back a day this week due to the MLK holiday so EIA ethanol will be released tomorrow and export sales on Friday. Yesterday we did see export inspections and both corn and wheat rebounded from the soft showing the prior week. We loaded 29.4 million bushel of corn, which was 49% above the previous week and 25% above the 10-week average. Still, to reach the target of 1.75 billion the weekly average needs to increase to 38.2 million. Wheat came in at 11.4 million bushels, up 29% from last week and right on the 10-week average. To reach the 925 million bushel target though, we will need to push this number up to 20.8 million. The bean number slipped back to 55.8 million, which is still a solid number but was 18% below last week and 26% below the 10-week average. Here though, we have room to slip as to reach the 1.77 billion target, weekly averages only need be 16.1 million. In case you were wondering, China took 73% of this total loaded.

It is worth noting that there is considerable economic uncertainly around the world right now. As I commented yesterday, China recently reported slowing growth and Europe has barely held above a recession and is preparing to vote on a massive QE program. While the drop in crude oil has and will be a positive factor for many countries, considering that OPEC oil is priced in US dollars and that the dollar has been tracking higher that has mitigated part of the bonus. Since summer crude has dropped almost 60% in price while the dollar has rallied just over 18%. Evidently there are a few that have become uncomfortable with the uncertainly and have retuned to gold. Since the beginning of the year spot gold has rallied 11% and is back above $1300 for the first time since August.

I believe the uncertainly with the world economy along with the adequate to ample grain and soy inventories could spell out a relatively stagnant period for prices, particularly for corn and wheat for the next three to six months.

We have begun this shortened week with pressure in the grain and soy markets and to a large extent; I have to believe the dour attitudes have more to due with the macro scene than the micro. There were two key economic releases over the weekend and neither provided much encouragement for robust economic activity as we move through 2015. First the International Monetary Fund cut it’s projection for world economic growth by .3% for both 2015 and 2016 and this in spite of the fact that we are dealing with lower oil prices. Possibly of more immediate concern, China released its 2014 GDP and their economy grew only at a pace of 7.4%. At first blush that may sound like pretty solid growth compared to the numbers being posted by many western economies but, that is the slowest expansion in 24 years. When you have a rapidly aging population in excess of 1.3 billion people, they cannot afford to see activity slow down like this. Of course the fears are we will be facing a slowdown for export activity from the US particularly as the news pushed the dollar higher again this morning.

I have to imagine as well that the cancellation of 285k MT of beans by China last Friday is weighing on traders minds. Yes, we did post a surprisingly sold sales figure last week but many feel that have reached the end of their North American buying spree and with no real problems brewing in South America, more cancellations will be forthcoming and the majority of the business will be directed there.

Good rains fell across both Brazil and Argentina over the weekend with only the northeastern corner of Brazil missing out. Forecasts predict that area will see moisture this week though. The early harvest continues to move ahead and it was reported that 4.1% of the beans in Mato Grosso have been harvested which is right at the normal pace. For the country as a whole it is estimated the 1% of the harvest is completed at this time. In a separate release, Rabobank Brazil projects that corn stocks in Brazil will reach a 15-year high after the upcoming harvest.

While it would not have been much of a market factor at this point anyway, it is interesting to note that the Bureau of Meteorology of Australia has once again dropped the El Nino alert as the Pacific waters have returned to more normal readings. It seems this is at least the second if not the third time this year that El Nino alerts have been issued only to be rescinded later. It is beginning to sound like the fable of Chicken Little.

At this point in the morning we have energies weak, the dollar higher as well as equities and metals. We shall have to see if any of the weekly releases provide us something new to work with but with nothing fresh (positive) I suspect prices will trade defensively through the balance of the month.

It would not be a stretch to say that few people were surprised to hear that the inflation rate dipped lower in December, as we have all felt the impact of falling energy prices. What they may have not realized was that the .4% drop was the largest one-month decline since December of 2008 (financial panic) and pushed the headline Consumer Price Index number down to just .8%. Of course we all know that commodities, i.e., food and fuel, can be very volatile, so the number that many economists watch, including the Federal Reserve, is the core CPI number that excludes food and energy. Even this number was .1% lower for the month coming in at 1.6%, and marking the second month in a row of declines.

For most, a low rate of inflation affords us to spend less on goods and products and theoretically should encourage people to spend more on additional “things”, which in turn will help stimulate the overall growth in the economy, which in turn will create more jobs and higher wages, the skies will always be blue, babies will never cry, and by golly, the Cubs just might win the World Series in 2015. Funny thing though, things do not always seem to follow the economic textbook examples of how they are supposed to work out.

For example, take the fact that we do seem to have this nearly non-existent rate of inflation. Theory would say that if jobs are being created, unemployment is heading lower and wages higher, then consumers would gleefully be spending their earnings, which in turn would be pushing the inflation numbers higher. But that has not been the case. Add this to the fact that over the past six years the Federal Reserve has pumped trillions of dollars into the economy through Quantitative Easing in an effort to stimulate growth, which in theory means we have more dollars chasing the same goods and should be pushing prices higher. Much to the chagrin of the hard money crowd and purveyors of all things that glitter, that has failed to live up to the textbook example as well and has created a bit of a conundrum for economists as well as the Federal Reserve. If there is no threat of an overheated economy and rising inflation, can interest rates really be raised? But if we do not, is it creating a scenario that once they are raised it will throw the economy (and markets) into a tailspin as everything has now been predicated on cheap money?

Of course one might ask, what is so wrong with low or no inflation? Realistically there can be a number of eventual ill effects, particularly if we move all the way to a deflationary scenario. When this is the case, net worth, particularly against debt, can began to move in reverse and consumers can actually adopt a pattern of delayed spending. If this happens, much like the residential real estate market over the past couple years, it can translate into slower if not negative economic activity, which in turn can spiral into fewer jobs and lower wages, etc., etc., etc.

The irony in all of this could be that these seeming enigmas are a result of our current belief that we can micro-mange something as large as the US economy. No matter how sophisticated the model, there are too many uncontrollable elements to believe we can predict what will happen each and every time. If you hold any belief in a natural law of economics, it would only make sense that if we artificially prop up or restrict one facet of the economy, it creates imbalance, which ultimately will be corrected, but in the process will produce unexpected reactions.

I guess in the greater scheme of things, that is the way it is supposed to work. We face abundances and shortages that we occasionally create, but over time the “Invisible Hand” that Adam Smith introduced us to finds a way to gather it all together and bring it back into balance. Of course, that line of thought may not settle well with those who feel they can map out and control everything in the future; maybe that is why we need these episodes when the textbooks just cannot explain why this happens. Lets face it—life would actually become pretty boring if we could predict the future.

As I sit down to write the commentary this morning we are T-Minus 72 ½ hours until the January USDA reports and it would seem that just about everything else becomes a side issue at this point. I have often lamented the fact that we seem to place an inordinate amount of emphasis on each and every report issued by the USDA but have to admit that this one is a bit more crucial as it will include a quarterly stocks report and theoretically will set the tone and market parameters into the spring. While there is the possibility of an element of surprise in the production figures, unless the USDA elects to make a big shift in the harvested acreage, that figure I believe is of a lessor concern to what may show up on the grain stock figure, particularly for beans. If you recall, it was back in October the government surprised us with a cut in the ending stock of beans for the 2013/14 crop year to 92 million bushels market from the previously estimated 130 million which had been around that level for months of reports. The question is will the usage for the last three-months now appear 40 million bushels stronger than is realistic due to the fact the we needed to refill this depleted pipeline? We witnessed a similar situation a year ago in corn. I guess we shall have to wait until Monday to find out.

While they may be taking a back seat to pre-report anticipation, there are other elements that we need to keep track of. The weekly ethanol production figures did raise a few concerns. While you cannot call a production of 279 million gallons poor, that was the lowest number recorded since the last week of October. This still represents around 100 million bushels of corn usage but was 2 ½ % below the 4-week average and 2% below the 10-week average. Possibly more telling is the fact the ethanol inventories climbed another 32 million gallons and over the past two months have increased 70 million.

Exports sales were released this morning and were solid on beans but for corn and wheat…not so much. Corn sales came in at 387,700 MT or 15.3 million bushels, which was down 57% from last week, 55% from the 10-week average and set a marketing year low. Even though that was a shortened week, it was disappointing. Top purchasers were Mexico with 251.3k MT, Columbia at 63.4k MT and Japan buying 50.1k MT. Year to date total sales stand at 1.076 billion, which is about 3% behind the same time last year. Beans in turn posted a surprisingly strong 910,600 MT or 33.5 million bushels. This figure was up 49% from last week, 39% over the 4-week average but was still 4% below the 10-week average. I am sure you will be shocked to hear again that China was the top purchasers with 550.1k MT or 60% followed by the Netherlands at 134.4k MT and then unknown destinations at 60k MT. The wheat demand appeared to have fallen off a cliff this past week as we sold a mere 151,000 MT or 5.5 million bushels. This figure was down 57% from the previous week, 61% from the 4-week average and like corn, set a marketing year low. Evidently no one around the world is having problems securing wheat even in face of all the hype about restrictions coming up in Russia. The top purchasers were the Philippines with 201.4k MT, Iraq buying 50k MT and Japan for 28.3k MT but much of this was offset by cancellations of 116.8k MT by unknown.

Looking out to Monday, we have a couple more surveys released. Reuters averages have corn production at 14.349 billion, ending stocks at 1.927 billion and December 1st stock of 11.123 billion. For beans they came up with total production of 3.956 billion, a carryout of 393 and Dec.1 stocks of 2.59 billion. Wheat ending stocks at an evil 666 and all acreage at 42.56 million. The other and we believe more important estimate, particularly seeing that we participate in it, was conducted and released by the Wall Street Journal. Here we find an average corn production estimate of 14.366 billion with and average yield at 173.5. Carryout at 1.94 billion and December 1st stocks at 11.161 billion. For beans the average estimate for production came in at 3.965 billion with a yield of 47.7. Projected carryout at 402 million and a December 1st inventory of 2.608 billion. Wheat ending stocks are estimated to be 663 million.

I suspect we will look at choppy, generally range bound trade between now and Monday.

If ever there appeared to be a living example of a dead cat bounce, it would be found over the in the crude oil markets this morning. After pressing below $50 a barrel for the first time since May 2009 yesterday and opening lower overnight, we have roared back to post gains of almost $.50 this morning. I guess I should not make light of it as after 26 weeks of a down swing with losses in excess of 56%, we could be in line for a low at any time. As the old Chinese proverb says, “A journey of 1,000 miles begins with one step” but I am not sure if this would qualify as a step quite yet. Where I have been surprised though is that this has not appeared to impact the psychology of the corn market yet. Part of this could be due to the fact that we have continued to post impressive weekly ethanol production numbers but one has to believe the handwriting is on the wall. Blenders are back in the negative and were it not for the mandate, there would be no incentive for usage. Additionally, with the dollar screaming into higher highs each week, imports appear viable. As noted previously, inventories have been building and I suspect that number will be closely watched in the EIA report later this morning.

Outside of the cold weather that is gripping much of the nation, there is really little else to push and pull the grain markets as we await the reports next week. Bloomberg issued an analyst survey, which breaks down as follows; Corn production 14.342 billion bushels with an average yield of 173.4 and projected carryout of 1.944 billion. This would compare with the last USDA figures of 14.407, 173.4 and 1.998. The average estimate for December 1st stocks is 11.138 billion. For beans they came up with production of 3.962 billion, a yield of 47.7 and carryout at 401 million. The last USDA numbers were 3.958, 47.5 and 411. December 1st stocks show up at 2.599 billion. In wheat, they project a domestic ending stocks figure of 667, up 13 million and for all wheat acreage they come up with 42.63.

The Hueber Report has put together our estimates and we come up with the corn production at 14.54 billion with a yield of 175.4 and carryout of 2.12 billion. We are looking for a December 1st stocks figure of 11.54 billion. In beans we are estimating a crop of 3.986 billion using a yield of 47.65 and projected carryout of 413 million. December 1st stocks of 2.625 billion. For wheat, we are estimating a carryout of 665 and are looking for all wheat acreage at 42.75.

The January report traditionally is a critical number as we realistically set the tone for markets then into the spring. We shall have to be patient and see what Uncle Sam has in store for us but seeing that prices remain towards the upper side of a three-month rally I believe the burden of proof lays with the bulls at this time.

The early morning strength developed into an out and out rally yesterday as funds piled into the buy side once again. Funds added around 8,000 contracts to their already sizable long position in corn and were estimated to have purchased over 12,000 contracts of beans, 3,500 meal and a similar amount in bean oil and around 2,000 wheat. Other than a few stories about dry weather in northeastern Brazil there appeared to be little to have stimulated the buying. As such one has to assume that buyers are willing to bank on a positive report from the USDA next Monday.

Export inspection did not hold any surprises. We loaded 21.2 million bushels of corn, which is just slightly below the 10-week average of 22.4. Year to date we have inspected 478.2 million bushels which is overall slightly ahead of the same time last year but still lags the pace we need to keep. To reach the USDA target of 1.75 billion we will need to average 37.4 million per week moving forward and to date the average has been 26.6. Bean export were still larger than corn and wheat combined coming in at 51.7 million bushels but note, this is the first time this marketing year that we have slipped below the comparable week a year ago and was 37% below the 10-week average. Of this total, 69% or 35.8 million bushels were destined for China. Wheat actually bounced back from the prior week with loadings of 13 million bushels and was also a bit above the 10-week average of 11.4. Regardless, we need to see the week pace kick up to 19.7 million to reach the USDA target.

The early harvest continues to expand in Brazil with progress being made in both the states of Mato Grosso and Parana with yield reports ranging from 22 to 58 b/p/a. Another interesting note from South American in that the Argentine government will not allow banks to provide credit to farmers that continue to hold soybeans. It seems amazing that country can function at all.

We will have Informa releasing crop estimates today and I suspect a few more will be out later this afternoon, including our own. Prices have continued to extend the strength so far this morning and while there is a risk this could turn out to be a Tuesday undo session, funds will often position for three days in a row so I suspect they have not completed their buying just yet. The equity markets are flat after the washout yesterday but energies remain in a free-fall and the dollar continues to race into higher highs.

For those not keeping track, this is the 12th and final day of Christmas but the first full week trading for 2015 and here in Northern Illinois, a very cold one at that. We are looking at a solid rebound across the grain and soy complex this morning and while the reasons given for the bounce are varied, I have to believe realistically this is little more than a reaction to harsh selloff we experienced last week.

The two most positive elements that we have this morning are the cold temperatures across the Northern Hemisphere and a few dry spots showing up in Brazil but I do not believe we will see much traction from either. Thankfully we did see snow cover arrive before temperatures took a nosedive and the overall weather outlook for South American remains favorable for good crop development.

We should begin to see the volume of trade pick up gradually over the next few days as everyone returns to their offices but the limiting factor will likely be the impending USDA final crop report due next Monday. This report could realistically set the tone for the market through at least the first quarter and possibly the first half of the year. We will report estimates as they are released throughout the week.

Things are not quite as positive in all commodity markets though as crude oil is under pressure again this morning with spot futures zeroing in on the $50 mark. So far the corn market has been somewhat impervious to the trade in energies as good margins have kept ethanol production strong but one has to wonder for how long? It was not too many years ago that the general sentiment was the corn market would be regarded more as an energy market than a feedstuff but thankfully that has not been the case recently. Also this morning we have the U.S. Dollar racing into higher highs, equity markets lower and metals higher.

Technically we did suffered damage last week and could see two to three days of corrective action to balance some of this and there will be fund rebalancing later this week but unless we find a story that the bulls can really sink their teeth into, extended strength could be a challenge. The biggest uncertainty that we have right now would appear what the reports on the 12th will have to tell us.

As 2014 draws to a conclusion it seems appropriate look back at some of the highlights of the year and conduct a mini comparison to where we were a year ago. This has certainly been a transitional year where it would appear we have finally moved from a position of moderate to severe tightness in inventories both domestically and worldwide to one of moderate to severe excess. It seems that just about every country that produces grain around the world registered record or near record crops, albeit some with a few quality issues. While others may disagree, I believe the two key topics of the year revolved around Russia and China. Concerning the first, in late February of this past year while the winter Olympics were being held in Russia, there was an internal revolution in Ukraine which created enough tensions between these two countries that war seemed imminent and eventually Russia invaded (was invited) Crimea which technically was a part of Ukraine. Seeing that both Ukraine and Russia are major players in world grain production and export, markets were understandably concerned and built risk premium into prices. Additionally, the western world enacted several economic sanctions against Russia as chastisement, which has over time turned their economy south and sent their currency into record lows against the dollar and others. While this overall political situation remains in flux, it turns out there was little to no negative influence on grain production in either country, and realistically pushed them into even more aggressive exporters to help with cash strapped governments. Once that realization was accepted, Russia/Ukraine ceased to be much of a supportive influence at least until a few weeks ago when talk began the circulate that Russia was looking for way to discourage exports of wheat in an effort to stem food inflation at home. You really do not need to stretch your imagination too far to think that the ongoing problems there could have an impact on next year’s grain production but for now, the trade has other things to focus on.

The second key topic has been China and it almost seems appropriate to refer to it as the Yin/Yang of doing business with that country. On the negative side, beginning in November of 2013 they began enforcing a zero-tolerance policy for the import of the yet to be approved Agrisure Viptera MIR 162 strain of corn. While this move looked to be motivated by the fact that they had produced several good crops in a row and were having a difficult time managing the massive inventories they had, but effectively this shut U.S. corn out of their market. Then around seven months later they extended the ban to DDG’s, of which they accounted for around 60% of the U.S. exports. On the Yang side, China has appeared to have an insatiable appetite for beans, as they have been rebuilding inventories for it seems three years now and for the past six months of this calendar year have posted week after week of large purchases. Worldwide, it never appeared that there was an issue with supply but as we know, the United States realistically would have run out of beans before the end of the crop year had we not brought in record imports. Here now at the end of the year, pipelines are refilling, we have produced a record crop of beans by a significant margin, South America appears on the way to producing another record crop and China’s demand appears to be waning a bit. That does not sound like a good combination for positive price action in the months ahead. On the other side of the coin, just this month they have approved MIR 162, which is psychologically positive for corn, but realistically they have so many strings attached to imports right now it is not expected that they will become a major player for some time other than in the DDG trade.

While all of this was occurring, the United States was able to produce record corn and bean crops and an adequate wheat crop. For corn and beans, it was like the perfect storm as did we not only plant the second highest corn acreage in recent history and the highest bean acreage on record, we recorded new record yields for both crops. While we will not have the final tallies for a few weeks yet I thought it might be interesting to compare the numbers from one year ago against the current estimates.

Looking first at corn, on the December 2013 supply and demand report, the USDA had estimated that the usage for the crop year would be just over 13 billion bushels and we would finish the year with stocks of 1.792 billion bushels. Of course, this was a dramatic increase from the prior year when we ended with a pipeline supply of just 824 million bushels (later revised to 821), and at the time the market was in a psychological funk. A year later we know that the overall usage was understated by almost 500 million bushels and the ending stocks were reduced to 1.236 billion. Still an adequate supply but hardly burdensome. The week of Christmas 2013 spot corn futures closed at 4.275. As it currently stands, the USDA has boosted the total usage projection for the 2014/15-crop year to 13.67 billion, which is 620 million above the estimate on the same date last year and 120 million above the actual 2013/14-crop year usage. Even with this, the carryout number is projected to grow 206 million bushels compared to last year but note that the price for spot futures is down only $.12. It would seem to me that the challenge that the corn market has now moving into 2015 is that we already raised the bar for usage. If correct, then to justify higher prices we would need to either cut supply, which could happen if the USDA cuts acreage on the January report or we run into a weather issue with the next crop, which of course would be six months away. Compounding the issue, we have the speculative community via funds quite long, which is just the opposite of the situation we were looking at twelve months ago. With a scenario such as that, the burden of proof lays with the bull.

Over on the bean balance sheets, a year ago at this time the USDA estimated that with a 3.274 billion bushels usage we would have a tight situation with beans but would still end up with a carryout figure of 150 million; very comparable to the previous crop year at 141 million. Additionally, the general consensus was that if South America produced a good crop, China would divert their business down there and we could move comfortably into the next harvest. As we now know, South America did produce a good and in fact record crop, but China continued to buy from the U.S. nevertheless. While the reasons are likely many, the logistical issues they confronted in South America the prior year were evidently not forgotten. Ultimately, the total usage for beans came in 204 million bushels higher than that December estimate and had it not been for the record import of 165 million bushels, our inventories would have been depleted. On the Friday of Christmas week last year spot bean futures closed at 13.31 and into the spring had rallied to as high as the 15.50 mark. If we fast-forward to the present, we now know that we have produced new records for both yield and total production and by hook or by crook scraped together enough inventory to reach new supplies. Spot futures just after Christmas closed at 10.47, down $2.84 from the previous year reflecting the now adequate to excessive supply of beans. While the final production number is still a few weeks off and the South American crop is growing, it would seem that beans confront the same issue as does corn. The USDA has already boosted the total projected usage for this marketing year by 260 million bushels above the estimate a year ago and even 177 million above last year’s actual usage so the burden now will be to live up to that expectation. We are aware that to date, China has been buying at such a pace to support the outlook but the figures have been steadily dropping for the past several weeks. On top of that, there already appears to be a general consensus that we could see one to two million more acres planted in the United States next year. From a fundamental standpoint, it would seem that the outlook for beans is quite bleak. That said, the technical action has never bore that out and as I have written in previous letters, we have been in a standoff between the two camps now for the past two months. I suspect we will need to at least move out to the January 12th final production and supply and demand report before we uncover the victor, but as with corn I believe the burden of proof lays with the bull.

Finally, on the domestic front wheat has never looked at a burdensome picture. On the December 2013 report the USDA estimated we would have a comfortable supply of 575 million bushels but even then the figure was down 128 million bushels from the prior year and would mark the lowest ending stocks figure in six years. The Friday after Christmas spot futures closed at 4.27. Prices really remained under pressure from that point until February but we finally shook off the bearish control by the aggressive moves of the Russian bear. Even that turned out to be temporary and once the world felt comfortable that exports would not be disrupted and there were no serious crop issues around the world prices headed lower into fall. But once again we were shocked out of bearish complacency and a heavy short position by the speculative funds with additional concerns with Russia and the need to build in some risk premium once again. Moving forward to December 2014, we see that for this crop year the government actually projects that usage will slip by 292 million from the previous year estimate and the projected carryout will climb 79 million bushels and yet today the spot price is just a touch higher than were we where at that time. Does the market feel we need to build in additional risk premium due to the political uncertainties in major producing countries around the world? While that could be the case, I tend to believe the recent advances have pushed prices higher than the numbers would suggest realistic and unless a real problem develops somewhere, we will give back a sizeable portion of the gains in the New Year.

While this little review exercise does not necessarily provide any answers to what markets will be doing in the year ahead, I believe it does lend a perspective of the current price and at a minimum reinforces they idea that we have moved into a new era of adequate to abundant supply that we have not experienced for several years. With the growth engines of ethanol and export trade leveling off, price moves will be primarily influenced by production problems somewhere. In that kind of net sum game world, someone will have to suffer a disaster to stimulate price action and you just hope it is not you. Welcome to the new/old world of Agriculture with one major change. Prices have elevated to a new realm with along with higher prices come greater risk. Sharp pencils and disciplined risk management are essential more now than ever.

Technically, this is the start to the new trading year but it does not feel like it the way this week has been broken up. Grain and bean markets did suffer a relatively harsh break down on the last day of 2014 and without a rebound for the close today we will have confirmed negative chart patterns for several commodities.

We did have the weekly ethanol report issued on Wednesday and while down 2% from the prior week were still solid at 285,768,000 gallons representing around 103 million bushels of corn used. Inventory of ethanol did increase 20 million gallons and over the last two-months of the year inventories have built 38 million gallons. A trend worth keeping an eye on.

I was mistaken on Wednesday in that exports sales were released this morning and not next Monday and corn sales were a bit above the high side of expectations while wheat and beans fell right in line. For the week ending December 25th, we sold 895,000 MT of corn or 35.2 million bushels. Granted this was down 48% from last week and 20% from the 4-week average but as we know it was also a holiday-shortened week. The top purchasers were Taiwan at 78.3k MT, the Dominican Republic with 58k MT and Nigeria purchasing 32.5k MT. Soybeans sales came through at 611,000 MT, which was down just 4% from last year but down 25% from the 4-week average and 38% from the 10-week average. At the top of the list once again was China taking 344.2k MT or 56%, South Korea at 79k MT and Spain with 72.8k MT. Wheat sales actually rebounded as we sold 354,100 MT or 13 million bushels. This number was almost 4% higher than the previous week, but still 8% below the 4 and 10-week averages. The top purchasers were Taiwan with 78.3k MT, the Dominican Republic at 58k MT and Nigeria taking 32.5k MT.

While there would appear to be nothing earth shattering in the grain specific new this morning, the macros are anything but supportive. Energies are under a little pressure, metals down sharply, equities higher and the dollar is sharply higher. As I commented in the initial paragraph, unless we see a sharp rebound for the close today, we will begin this New Year with a rather bleak technical outlook for the grains and soy markets.

The Hueber Report wishes everyone a Safe, Happy and Prosperous New Year!

Here we are on the final day of 2014 and find lower prices across the grain and soybean complex. This appears to be a continuation of the long liquidation that began yesterday and while I would not expect it to be severe today, the technical implications could ultimately be important. As I commented in technical remarks for subscribers yesterday, without a rebound on Friday, we could be recording key reversals and combined with the number of cycle dates I have lining up for the end of the year and the overbought position of these market, it may have setup a discouraging outlook for the early quarters of 2015.

Of course, we will need to move beyond the final production report to be released on the 12th of January. Considering that the USDA has already factored in what I believe to be fairly optimistic usage numbers, if correct that would suggest that the only thing bulls can hang their hopes on to sustain the strength would be lower production figures. Yes, there remains a debate as to if there will be a big adjustment in the harvested acreage number on this report, which the bull seems to be counting on but I remain in the camp the feels the changes will be insignificant. It is interesting to note that a year ago at this time, funds and specs were quite bearish, heavily short and pushed prices lower into the end of the year and into the report only to mark the lows for the first six months of the year. This year it would appear we could have the opposite setup.

I see no changes in the outlook for weather in South America and overall crop development looks solid. It is reported that bean planting in Argentina is now 91% complete and corn 75%.

We will have the weekly ethanol figures released later this morning but with the holiday break, export sales will once again be pushed off until next Monday. Markets do trade normal hours today but after the close will not reopen until 8:30 CST on Friday.

Once again we wish you all a Safe, Happy and Prosperous New Year and Thank You for the opportunity to share our thoughts and ideas with you each day.

It was a bit of a disappointing day for the bull yesterday, particularly in the corn and bean markets. Each had pressed into new highs for the recent swing only to exhaust and finish lower for the day. Wheat did manage to close higher but the gains were meager and we have surrendered them now during the overnight trade.

As I covered yesterday morning, export sales were solid for corn, okay for beans and lacking in wheat and inspections did not offer anything better. Granted it was a holiday shortened week but the loadings broke down as follows; Corn, 24 million bushels, which was barely above the 10-week average of 23.2 million. Year to date we stand at 457 million, a bit over 2.5 million ahead of the same time last year but we need to see the weekly pace pickup to 36.9 million reach the USDA target. So far this year we have been averaging 26.9 million. The bean inspections were down 37% from last week and 39% from the 10-week average and was the first time we posted a number below the weekly average for the marketing year. Wheat was less than impressive as well coming in at just 7.3 million bushels. This was down 55% from the previous week and 32% from the 10-week average. To reach the USDA target of 925 million we need to see the average step up to 19.5 million each week and so far this year we have averaged 16.5.

Other news is generally sparse as we wind down this calendar year. China will auction 5 MMT of corn from reserve next week, which is regarded as poor quality and at a premium price. The biggest catch is that for an importer to receive a license to bring in 1 MMT of corn they will need to have purchased 10 MMT of reserve corn. Note that yesterday the USDA did report that for the marketing year China has been an active buyer of sorghum from the United States. Sales. last week totaled 584.7 MT, which were over 3 times the previous week. Year to date we have sold 3.264 MMT compared to 2.03 MMT a year ago at this time. This the strongest pace in the past 19 years and over half of these sales have gone to China. It is estimated that they will eventually import 5 MMT this marketing year.

Weather updates from South America continue to look favorable for good crop development and as I commented yesterday, the early harvest in Mato Grasso has begun with solid yields reported.

First notice day for January futures is tomorrow and I suspect trade today and tomorrow will predominately be positioning for the end of the year. Markets will have normal trading hours tomorrow and Friday.

We have begun trade for the final three days of 2014 and the wheat market has remained in positive territory thus far. Over the weekend, Russia finally clarified the official changes to their export policies for wheat and beginning February 1st of this next year and running through June, there will a duty changed of 15% of the customs price plus 7 ½ Euros and no less than 35 Euros per tonnes, which would be approximately $43 a tonne. Additionally the government will purchase third-class wheat at a price of $186 tonne in an effort to rebuild inventories. I suspect this announcement helped shore up prices overnight but the fact that we had sold off sharply late last week and that cold temperatures are forecast to return here and in Europe was probably a greater reason for the bounce.

The delayed export sales report was issued this morning and for the week ending December 18th we sold 293,000 MT or 10.77 million bushels. This leaned towards the low end of trade expectations and was 39% below the previous week and 30% below the 4-week average. Outside of this I would expect to see dwindling volume and position squaring as we finish out the year.

Corn

The corn market was struggling just a bit as we began this new and final week of the year but a solid export sales report helped to shore up the confidence of the bulls once again. For the week we sold 1,700,000 MT or 66.94 million bushels, which was above the upper end of estimates as the trade had been expecting a figure of between 800k and 1 MMT. This number was almost 2 ½ times the previous week and was 81% above the 4-week average. The top purchaser was unknown destinations taking 452.1k MT, followed by Japan with 432.2k MY and then Mexico with 268.9k MT. Could it be that China has indeed been buying corn since the ban on MIR162 has been lifted?

Last week the Buenos Aires Grain exchange reported that corn planting in that nation reached 59.7% complete of the 7.2 million acres projected this year. This would be 5.5% behind that pace set last year. Overall conditions are rated good.

Corn has slowly been able to creep into higher ground over the past few sessions but March futures have yet to reach my overhead targets between 4.19 and 4.26. While there could be a little evening up as we reach into the final few sessions of the year I continue to believe these are valid targets. It would appear that we may be able to hold the recent strength possibly out through the January 12th report but would need positive reinforcement from that release to think we could sustain these levels. Let’s not forget that it was just a year ago that the funds tried to press corn lower into the final report in anticipation of a bearish number and then succeeded in pressing in the low for the first six months of the year on the 10th of January.

Soybeans

Soybeans have been able to build a bit on the turnaround rally posted last Friday but so far remain entrenched in the overall sideways pattern. While they have not exactly fallen off a cliff, export sales were lower again this week coming through at 635,800 MT or 23.36 million bushels. This was 9% lower than the previous week and 38% lower than the 4-week average. Technically China shows up as the top purchaser with 618.2k MT followed by Thailand at 76.6k MT and Vietnam at 76.5k MT. As you might surmise, there were cancelations of 501.3 MT from unknown destinations as well as a few smaller quantities from other nations.

The overall weather conditions and outlook remains favorable in South America and it was reported over the weekend that early harvest has begun in the state of Mato Grosso in Brazil. These beans would have been planted around the 15th of September and even though they are short-season varieties, yields are reported to be in the 51 to 53-b/p/a range.

Even with the strength so far this morning, this market is telling us nothing new. As with corn, we may ultimately need to set tight until we reach the final crop numbers on the 12th of January to receive a tip-off for the action in the first quarter of 2015.

It is human nature to desire to finish on a strong note. For a golfer, it may be nailing a great drive on the 18th hole, for a performer it may be hitting a perfect high C on the final note of the aria. And for a recovering economy, it would be news that growth is gaining momentum, and that is just what we received this past week in the form of the revised 3rd quarter growth for the United States. Previously reported at 3.9%, which in itself was not bad, the recent update boosted the number to 5% and this on the heels of the strong 2nd quarter growth of 4.6%. This was the strongest quarterly number posted since 2003, and even then there was only one quarter in which we grew at a stronger pace dating at the way back to 2000. Several economists have pointed out, correctly, that it will be challenging to post that robust a number in the 4th quarter as there had been a solid pickup in military spending between July and September that will not be repeated. Potentially balancing that out is consumer spending which appears to have finally come back to life. Not only has the recent drop in fuel prices created a positive effect, we have unemployment numbers continuing to decline, which are down a solid percentage point over the past year and average wages increasing. Personal income in October was up 4.2% over the previous year, which is the largest annual gain since December 2012. With the all of these factors, Americans have more money in their pockets. You do not have to look very far to find a debate between some economists as to what portion Personal Consumption Expenditures represent in GDP numbers, but there seems to be some agreement that the number is between 2/3rd and 70%, making consumer spending an extremely important part of our economy.

If you recall, due to the extreme winter we suffered earlier this year, we posted a negative 2.9% 1st quarter GDP figure. Had it not been for that, we may have registered an annual number north of 3%. All things combined, unless we see something extraordinary for the final three months which seems unlikely, we should finish around the 2.5% level. To give you a comparison, post-recession we have recorded annual growth of 2.53% in 2010, 1.60% in 2011, 2.32% in 2012 and 2.22% last year. There will be headwinds as we move into 2015, as the rest of the world has not been sharing this upward trend. Regardless, it still feels good to hit that great shot on the 18th hole or belt out the last note for the final performance of 2014 and provide the optimism, and ideally momentum, as we push on to the next round.

As you might suspect on the day before Christmas, news is relatively quiet this morning and is basically just a rehash of topics we have been discussing for a number of days already. Russia probably remains the biggest topic as most expect that they will curb exports soon but just how quickly is the question. Regardless it should open the door for 3 to 5 MMT of export business for someone but who that will be remains the unknown. Nothing fresh coming from South America but the overall weather outlook remain favorable for good crop development. We will have the weekly ethanol numbers later this afternoon which should continue to look impressive but export sales will be delayed until Monday so we will have to wait until then to see if the Chinese will have backed off more on purchases.

Undoubtedly the biggest news in this pre-Christmas trade has been the performance in the equity markets as for the first time ever we have the DJIA pushing and closing above the 18,000 mark. The reasons behind the advance were solid as well as 3rd quarter GDP was revised higher by 1.1% to show growth of 5%, which is the strongest showing since 2003. This is also on the heels of the 4.6% growth in the 2nd quarter. It would appear that the economy of the United States has finally shifted into a higher gear, which is all the more impressive considering the weak economies in Europe, Japan and the slowdown in China. Of course the potential negative for us in the commodity trade is that the US Dollar has pushed to the highest levels traded since 2009 and will likely be a drag on the export of a number of products in the months ahead. Also, keep in perspective that this will likely speed up the time line for an interest rate hike.

I do not know how often we have been able to say that we are finishing out a year on a strong note in both equities and grain markets but that would appear to be the case for 2014. As we know though, for those in the petroleum business, their stockings have been filled with sticks and stones and lumps of coal. Can we carry this optimism (pessimism for energy) in to the New Year? Of course I do not possess any crystal ball that can provide that answer for that but for now, we should celebrate the improvements and we wish you all;

The news is sparse overnight, which is reflected in thinning trade as well. The way it going right now, by tomorrow the daily comments could be reduced to three or four sentences, which some might suggest would be an improvement.

The wheat market is maintaining a bit of strength as they await an official announcement from Russia as to if and when there will be official restrictions placed on wheat export business. In the mean time it would appear that exporters in that country are doing all they can to push bushels out before that happens. I have to suspect once any moves are made, it will be anti-climatic for the market as it certainly would not surprise anyone at this point.

Export inspections were actually a touch better than expected for wheat coming in at 16.2 million bushels which was 9 ½% better than the previous week. This brings the year to date loadings up to 487 million bushels and to reach the USDA target of 925 million we will need to see the weekly average bump up to 19 million.

Markets will close at noon on Wednesday and even though there will be trade on Friday government offices will be closed through the weekend so export sales will be delayed until next Monday. Outside markets are mixed as energies are higher, metals lower and the dollar and equity markets pushing into new highs for the year. Without an unexpected story popping up, I suspect trade will be quiet through the balance of the week.

Corn

The wheat market has been able to talk about Russia restricting exports and corn has been able to cheer on the fact that China has approved MIR162 but both are becoming tiresome stories at this point. Syngenta reports that they have received “official” clearance from China but of course they did not mention that Duracade is not approved. There has been a nice boost in the DDG business since the announcement but with the livestock sector in China bleeding red ink, the feel good bump the market received should be rather short-lived.

Export inspections improved to 31.1 million bushels, which was 40% above last week and 31% above the 10-week average. That said, we still need to see the weekly average increase to 36.6 million to reach the USDA target of 1.75 billion.

South American weather continues to be generally favorable. Yesterday Cordonnier raised his Brazilian corn estimate 2 MMT to 74 MMT. The USDA currently has the projection at 75 MMT.

We do have one more report to be released before Christmas and that is the quarterly Hog and Pigs estimate to be published this afternoon. The average estimates are as follows; All Hogs and Pigs 101.5%, Kept for Breeding 103%, Kept for Market 101.3%, Sept/Nov Farrowing 103.3%, Dec/Feb Farrowing 103.8%.

Soybeans

It would seem we have even less news to look at with beans than either wheat or corn. South American weather is forecast to remain very favorable for crop development. Cordonnier left his crop estimate unchanged at 93 MMT, which is 1 MMT below the USDA and a little less than 2 MMT below the most recent estimates from Brazil but regardless of how you slice it, the world would be awash with beans.

Export inspections bounced back to the largest figure in four weeks as we loaded 82.1 million bushels. This figure was almost 19% above the previous week but still 6% below the 10-week average. As normal, the majority of the loadings were headed for China and this last week accounting for 50.7 million bushels or 62%.

As I commented initially this morning, markets close tomorrow at noon and will trade Friday but without any news from the government until the following Monday. It would stand to reason that we should see light volume and action but of course, sometimes that can also mean more volatility.

On again, off again, on again. That would appear to sum up the news emanating from Russia in regards to export sales/shipments of wheat. First we hear officials stating there would be no restrictions placed on exports of wheat then another deputy minister states that there are proposals being drawn up for export duties and then over the weekend we see that Russia earned a portion of the wheat purchased by Egypt. The balance went to France. Realistically, the grain trade I believe has already accepted that Russia will be taking a much reduced export role in the weeks and months ahead, supplying only a select group of countries, but evidently some traders still want to treat this as interesting or fresh news.

Of course, there really is not much else to talk about this morning as we begin this short week so you grab what you can. Export inspection will be out later this morning with the trade expecting to see around 15/16 million bushels of wheat loaded. Funds lean a bit to the long side at this time so we shall see if enough positive news can be conjured up to keep them that way through the holidays.

Corn

It would seem that we have even less to discuss in the corn market this morning. Prices are under very minor pressure but we hold within the same range that we did all of last week. There remains a little bit of chatter about China and the acceptance of MIR162 and the possibility of imports but the criteria that has been issued to secure licenses at this time appears prohibitive so the odds of this happening appear remote. That said, DDG business has new life.

The USDA did announce a sale of 166,600 MT to unknown destinations this morning and the trade is looking for inspections in the 30 to 35 million bushels range. Funds are coming into the end of the year with a sizeable long position. Maybe they will be content to maintain this through the final crop production numbers on the 12th of January but by then, this bull will have become a bit long in the tooth and if the report does not provide reinforcements, remaining upright could be a challenge.

Soybeans

We have the same situation here in beans as news is sparse and it would appear trade is also. The general weather outlook for South America remains positive into January and we will begin to see early harvest begin around that time. Funds sit with a net long position and outside of ideas that the large buying to date by China will prompt the USDA to boost the export numbers on the January estimates, little to defend the length. Of course if the weekly numbers continue to drift lower that may be a tough line to endorse.

For now prices drift in what has been an over two month sideways congestion range and we can only remain patient until something fresh moves us on to other pastures where I am sure the grass will be greener.

The Federal Reserve Open Market Committee met again this past week. I have to admit, it has become quite entertaining to watch market analysts hang on each word that comes from the mouth of Janet Yellen and other members in an effort to decode the “real” message they are conveying. Or not conveying. These modern day financial crypto-analysts seem to try and dissect each vowel and placement of words within the sentence structure as if they were trying to write the next Dan Brown pseudo-mystery novel. Of course the members of the Fed do not help the situation; they must be schooled in the art of abstruse language. Why, just the other day, I understand that Janet Yellen was quoted as saying “We will capitalize on all opportunities possible to create indisputable ambiguity with the enigmatic messages we deliver in an effort to obfuscate their actual interpretation.” Alright, I actually made that up, but she and many of her predecessors have been quite gifted in talking around or alluding to the subject and the meaning they are trying to convey without speaking it outright.

This week, the question on everyone’s mind was, will the FOMC provide a definitive answer as to when they will begin to raise interest rates, and they did that, sort of. After previous committee meetings, the language of the Fed regarding a rise in rate included the words “considerable time”, which of course most assuredly means “not now”. This month though, the tone from the meeting indicated restlessness from members of the committee as the verbiage after the meeting changed to say they would remain “patient.” Wow, only a simpleton would not be able to detect the radical change. It would be akin to not seeing the difference between a navy or midnight blue coat. To help out those not gifted in interpreting Fed-speak, they did go on to say that the “normalization process”, i.e. rate hike, would be unlikely to begin for at least the next couple meetings. Phew, now I feel better.

Realistically, there is no one that questions that the Fed will likely begin raising rate sometime in 2015. First and foremost, we have been flat-lined just above zero since 2009 so unless we are going the route the Swiss Central Bank did this week with a negative interest rate for overnight deposits there should not be an element of surprise once that happens. Additionally, the Fed is continually giving us “Forward Guidance” so I fail to completely understand the obsession with trying to outguess the specific date they will announce it. If you have not made plans already for that day, shame on you. Currently, the Fed believes that the U.S. economy will grow between 2.6% and 3% next year, inflation will remain below 2% and unemployment will slip down towards the 5.2% to 5.3% level which is considered by many full employment. If these numbers fall roughly in line, then you can expect interest rates to rise. In fact, 15 out of 17 Fed policy makers believe the rate will be higher to some degree in 2015.

Regardless, after the announcement/non-announcement this week, equity markets posted the largest single day rally in over three years and we finished the week very close to the highs for the year. It would appear that the Fed provided us all with an early Christmas Present and a wish for Happy New Year.

After six higher closes in a row predominately stimulated by concerns about the conjecture about the status of Russian exports, the wheat market has experienced a reversal of fortunes overnight. The USDA estimates that Russia has exported around 16 MMT of the 22 MMT projected for this year and with the expected curtailment, other countries will likely benefit. The only problem is with the existing world price structure; it probably will not be a significant amount via the United States. France, Germany, Romania, Ukraine and Bulgaria all have wheat to spare and will likely grab the lions share of the void left by Russia. I suspect the reality of that caught up with the trade overnight.

There is an interesting side note as the CME did have to enact a rarely used rule as at 3:49 on Thursday morning as the price of wheat dropped so severely, trading was stopped. In one second March futures lost a dime which shut down trading for 10-seconds to theoretically allow the market “catch its breath” so to speak. While for most observers, myself included, this basically went by unnoticed but is a reflection of how volatile the market can become particularly when activity slows down during the holidays.

Not much else to work with this morning as we prepare to finish out the last full week of trade for the calendar year. As I have commented previously, markets have provided producers with a pleasant gift of higher prices leading into Christmas and considering that the overall world balance sheet has changed little, I believe it should be taken advantage of.

Corn

The corn market has also experienced a wave of profit taking after poking into a higher high yesterday. While March futures continue to hold above the old reaction high at 4.01, it is interesting to note that if we close below 4.07 ½ today, it will have been a down week.

The USDA did announce a couple nice sales this morning. 135,664 MT was sold to Japan and 101,604 MT was sold to Mexico but the market appears to have taken little notice. These two countries are our most reliable customers for corn.

Yesterday, the USDA also released the base line projections for the next decade and for the 2015/16-crop year they have placed corn acreage at 88 million, which would be down 2.9 million from last year. Interestingly enough, that is the lowest planted acreage number projected for the next decade and from there forward have the number bouncing between 89 and 90 million each year. They also have the ending stocks averaging around 1.7 billion year in and year out. Understandably, none of this did much to influence price action.

Informa will release planted acreage projections sometime later this morning.

We should be looking at lighter volume and of course shortened hours of operation for the next two weeks, which does open the door for more volatility. That said, it would appear that Russian excitement in wheat is behind us as well as any warm and fuzzy feelings about China accepting MIR162. As such, it may be a challenge to sustain the “spirit of giving” for the few remaining days of trade this year.

Soybeans

The bean market was able to sustain strength for the close yesterday but that sentiment has not been carried through into the overnight hours. If the early weakness is maintained, we will close below the settlement for the past two weeks.

While I do not believe it was any type of market factor it is interesting that on the baseline projections, the USDA placed 2015/16-bean acreage at 84 million acres, which would actually be down 200k from this past year. Let’s keep in perspective that this would still be the second highest acreage on record but many have been projecting a 1 to 2 million increase this coming year. After that they have acreage settling into the 78 to 79 million range with carryout settling in around 235 million. We shall see what Informa comes up with for next year later this morning.

No changes with the South American weather outlook. As I commented yesterday, when you a looking at a land mass that size you can always find a trouble spot somewhere but overall, the outlook and conditions appear favorable.

Neither the fundamental bear nor that technical bull has been able to wrestle control of this market as of yet but I suspect we shall be able to declare a winner between now and the end of the year. I actually remain somewhat torn as to who that will be initially but still have the give the longer-term advantage to the bear as there is nothing that can be done to eat up this world supply any time soon.

After playing the role of the neglected child who you knew was always hanging around as corn and beans took all of mom’s attention, the wheat market has returned to front and center in the past couple weeks. Realistically, it has not been since late last winter and into the spring that we have witnessed this kind of notice for wheat, which interestingly enough was stimulated by none other than Russia. Of course at that time it was a show of strength by Russia as they marched into Crimea but this time is due to a crippled economy and rampant inflation. While not officially cutting off exports of wheat, they are using more creative measures such as bottlenecking sanitary inspections for exports shipments evidently as an effort to make sure their customers only receive the highest quality, non-contaminated Russian products. Technically the only countries that Russia will be selling to without restrictions are Egypt, who is the world’s largest importer, Turkey, India and Armenia. It should be noted that on the December supply/demand report, the USDA already cut the Russian export projection by .5 MMT while boosting the EU, Canada and Kazakhstan and Ukraine by a combined 2.3 MMT so again, it should be kept in perspective that restrictions by Russia at this point does nothing to change the overall fundamental outlook, it just partially shift some logistics. An appropriate quote I read this morning by a French grain trader hit it on the head saying, Russia did not change the overall picture, they just added more volatility to the market.

Export sales did see an uptick again last week as we sold 476,200 MT or 17.5 million bushels. This number was 8% above last week, 23% ahead of the 4-week average and 21% ahead of the 10-week average. The top purchasers were Japan at 112.3k MT, Mexico with 84.5k MT and Nigeria buying 62k MT. For the year we have now sold 655.9 million bushels, which lags last year at this time by 24% but remains above the average needed to reach the 925 million bushel target. If only we could now increase the actual inspections to match the sales.

I continue to view this now 12-week old rally as a gift for the wheat longs and producers that should be exhausted by the end of the year.

Corn

Between the strength in wheat and the renewed optimism with China now welcoming certain GMO varieties, the corn bulls have been rejuvenated and pushed futures into higher highs for the swing once again overnight. As I commented yesterday, this shift would have to be considered a longer-term positive for corn and by-products and psychologically gives the market a boost but the odds of this turning into anything more than DDG purchases and swapping corn for now appear slim. Corn stocks in China are at a 13-year high and they have been struggling to manage the inventory to begin with. I suggest that if we do see purchases made, they will be met with equal if not greater exports from China this year, which would just cut into some of our traditional markets such as South Korea. The overall world picture has not changed and once the excitement wears off, the post celebration let down could be tough on the bull.

Export sales did not leave much to cheer about. For the week ending 12/11 we sold 693,400 MT or 27.3 million bushels. This was the lowest sales number in the past 5-weeks and was down 28% from last week, 30% from the 4-week average and 24% from the 10-week average. Not the type of trend you want to see this quickly in the year. The largest buyers were unknown destinations with 268.7k MT, Mexico at 159.9k MT and Japan with 114.3k MT. Year to date sales now stand at 960.8 million bushels meaning we will need to average 21.3 million per week for the next 37 weeks to reach the 1.75 billion bushels target.

As with wheat, the uncertainty around the world right now and the change of heart by the Chinese government appears to have provided the corn bulls with a reason to throw a Christmas party and could even give them reason to hold a New Years celebration and a nice gifts for longs. Be careful for that post holiday letdown though as it could drag out for some time into the new year.

Soybeans

Beans have taken a back seat to the grain markets over the past week, which is a position they are not accustomed to and remain trading in a broad sideway pattern. Realistically we have been moving sideways now since late October. As I have commented previously, this market seems to be torn between what appears to be an overwhelmingly bearish fundamental picture and friendly technical action led by fund buying and as it stands today, the jury is still out as to who will prevail.

Export sales, while not collapsing continue to trend lower. We sold 696,000 MT or 25.6 million bushels, which was 14% lower than last week, 27% below the 4-week average and over 40% below the 10-week average. China was back on top taking 402.4k MT or 58% of the total followed by the Netherlands at 130k MT and then Mexico taking 117.3k MT.

While I recognize you have heard this line time and again over the past two months, without a weather situation developing in South America I have to believe that eventually the bottom will come out of this market. Now that we have held together this long through, that may not occur until the calendar rolls over into 2015.

Where there is smoke, there is fire. Russia is the main focus in the wheat market this morning and while I cannot find a specific announcement there are various stories circulating concerning moves they are making or intend to make to try and stem the escalating domestic wheat prices. I have read that the issue of export certificates will be slowed or restricted to only a few select countries. Even though they have already likely exported the majority of wheat that they would have anyway, this story breathed new life into the bulls overnight. We have not yet pushed into new highs for the swing but have pressed right back against them.

Outside of this I do not find much news to talk about in the wheat market. Macros are not supportive as the dollar is stronger and energies weaker but metals are a bit higher. Export sales tomorrow morning.

Corn

Rumors have become reality for the corn trade as well. While I have not seen the official confirmation, it has been reported via a number of sources that China has indeed approved MIR162. I read that an official announcement may not come until January but with a caveat; They still have not approved some other GMO varieties such as Duracade so the subject is far from settled. This story did coincide with their trade meeting yesterday at the Union League club in Chicago and specifically should be a boost for the U.S. DDG market. Prior to the ban, they purchased approximately 60% of the DDG exports from this country and I understand yesterday they booked as many as 15 cargoes for delivery between December and March.

All this chatter did provide bulls with a little incentive overnight but at this time we have not traded outside of the ranges of the past few sessions. I believe there is still potential to see prices try and extend a bit higher from here between now and the end of the year but the overall fundamental picture we are staring at should limit this upside for the foreseeable future.

Soybeans

A few more bean bulls were pushed out of the game yesterday but by no means have we touched off a stampede for the exit gate. Prices have been able to bounce back a touch overnight but for how long we can hold is questionable.

I understand there will be some token sales from the trade delegation meeting yesterday but these will basically be regurgitating business that has already taken place. The export sales number in the morning should be interesting as China has been noticeably absent from sales announcement this past week. It stands to reason that they will be quickly winding down their buying program from North America and without a real weather issue in South America, should direct business for future needs down there.

While when we refer to the production regions in South American it is a large piece of real estate and inevitably there will be trouble spots here and there but overall weather has been very good. Both Brazil and Northern Argentina are expected to see good rains over the next 10 to 15 days with seasonal to even cooler than normal temperatures. Generally speaking, if a weather problem has not developed by the end of December, there is not going to be a widespread serious issue.

As I commented initially, we have not witnessed a full-scale exodus by the bulls at this time, which is somewhat impressive considering the news and the overall fundamental picture. That said, I suspect the next time we violate the 10.00 level in nearby futures, they may not remain as resolute with their holdings.

As concerns about the economic situation in Russia continue to escalate, the wheat market continues to find additional buying interest. With the Rubble crashing, the central bank raising interest rates to 17% to try and stem inflation and while there have not been any official restrictions placed on exports, it would appear that the government is looking into purchasing grain to buffer state owned stocks and is most likely looking for ways to slow the pace of exports. Of course the irony here is this is all occurring with a great production year.

Export inspections did bounce back this past week as we loaded 14.2 million bushels, which was 43% above the previous week and 21% ahead of the 10-week average. That said, this number was still shy of the 18.9 million we need to average to reach the USDA projection of 925 million.

There are no outstanding weather threats around the world at this time so realistically, outside of the concerns surrounding the economic situation in Russia, I see little to suggest we can continue to push this advance much further. I believe it is time for producers to be looking into adding both old and new crop sales.

Corn

The corn market was not able to extend the Monday strength into the evening session but we have not really surrendered much ground now in the overnight trade. I have to believe the ongoing wheat rally has been dragging the corn along but beans are now supplying the counter force.

Exports inspections remain uninspired as for the week ending 12/11 we loaded 21.5 million bushels. This number was a half million better than the week before but is still almost 11% behind the 10-week average. The year to date total now stands at 400 million bushels which is just over 3% ahead of last year at this time but to reach the USDA target of 1.75 billion we need to see the pace pick up to a weekly average of 36.5 million.

The conversation/debate surrounding the possibility that China could approve MIR162 has also been supportive over the past few sessions. Even if this does turn into reality, at this point in time, the impact will probably be more psychological than real. Long-term it would be a positive development and short-term it could help boost DDG sales.

As I have commented previously, late year rallies such as this may not bode well for the price action as we move into the new calendar year. As such, I believe producers should be looking at rewarding the Christmas gift being provided.

Soybeans

The bean market has taken a back seat to the grains at this time and January futures were rejected from the 10.50/10.55 level once again yesterday. It is not that we have collapsed at this time as prices have so far only returned to the low side of the recent trading range around 10.25 but each week it would appear bulls are finding less rationale to support the cause.

While crushing 161.2 million bushels of beans in November is nothing to sneeze at, the number was towards the lower end of expectations. Moving forward we should continue to see solid usage in this category as we rebuild pipeline supplies of meal but nothing to that would suggest the final number would be higher than already anticipated and factored into the price.

Export inspections also leaned to the lower end of expectations at 66.9 million bushels. Here are well on any given year this would be considered a solid number but the trend is working lower. This figure was 17% below last week and almost 21% below the 10-week average. Of the total loaded, almost 57% or 47.9 million bushels were headed for China with the number two spot awarded to the Netherlands with 4.8 million bushels. The sales report this week could be interesting.

For now we have the nearby bean market stuck in a little mini range between 10.55 and 10.25 and there is nothing conclusive that would suggest which side we may break out of over the short-term. Longer term though, unless a weather issue begins to develop in south America, which is not in the forecast at this time, I have to believe we will ultimately be headed through the floor.

We have begun the last full week of trade for the month and for the year with a little positive action all around in the grain and soy markets. The macros are mixed as we have energies a bit higher, the dollar strong and the metals under solid pressure.

While it is not that there is a lot of news around for other markets, you have to scratch pretty hard to find much of anything for wheat. There have been persistent rumors floating around that Russia intends to begin backing down their export program and while nothing has occurred to suggest that has begun, neither would it be shocking after the pace a which they have loaded wheat this year. Some believe they are already 85/90% complete for the year.

Between now and the end of the year several winter storms are forecast to travels across the west and the plains states potentially providing snow cover. If correct, this would be ideal as winter temperatures are predicted to return after the 1st of January.

There is always potential for a fresh story to pop up but for now I suspect wheat will be tugged to and fro by the action in the corn market over the next three weeks.

Corn

Nothing like spoiling the surprise. While not exactly an official release there was an acreage spreadsheet making the rounds last Friday, which reportedly was the FSA acreage numbers that are to be released this morning. Of course this opens the door for all sorts of jokes concerning the NSA and wire tapping. Regardless, there would appear to be little shocking in the data and they increased corn acreage 700,000 from their last estimate. This still leaves a possible million-acre discrepancy between the FSA and NASS but there is nothing to say that difference has to be rectified. If nothing else this provides traders something to argue about between now and January 12th.

The other interesting story making the rounds originated from a statement made by a company representative from Syngenta who said that China may soon approve MIR 162. Granted, this has not been confirmed through any Chinese sources nor if correct would it necessarily lead to any immediate business, but psychologically it would be a positive to the corn market. It makes one wonder what impact this could have on the pending lawsuits against Syngenta that have been filed by Cargill, ADM and others?

On the flip side of that news are reports that Turkey has now rejected 3 cargoes of DDG’s from the US due to GMO issues. The market seems to have largely brushed this aside for now but at the pace we are grinding corn for ethanol, we cannot afford to see a slowdown in demand for DDG’s.

I understand that the additional strength that we have experienced has been met with a good pickup in farm selling, which would seem like a reasonable approach. As I commented last week, rallies into the end of a year may not bode well for the outlook into the first quarter of the New Year.

Soybeans

The bean market continues to hover around recent highs and resistance but seems to lack the momentum to push higher with the corn market. Here are well, the “leaked” FSA data could imply lower acreage on the January production report but even if that were the case, many are looking for the USDA to bump yields a bit higher again.

Providing some support during the overnight trade was the anticipation for the release of the November NOPA crush data, which should be huge and the fact that Chinese trade representatives are in Chicago this week. It seems that there is always some type of sales announcement that accompanies these visits and many expect to see something for beans although that may be for the 15/16-crop year.

Even if the aforementioned topics are positive, one would have to believe we have already “priced” that news in. As I have commented in previous letters, if technicians can push nearby futures above 10.55 for a couple of closes, it could unleash a run for 11.00 and possibly even 11.50 but late year strength such as this could very well set us up for a challenging first quarter of 2015.

There is a story that has been circulating that goes something like this:

A group of grade-schoolers had just met for the first time. As a means of introduction, the teacher sat them in a circle and asked each one to tell a little about themselves as well as what their parents did. As you can imagine, the responses were quite varied and they soon learned that the parents worked in occupations such as truck drivers, bankers and full-time home keepers. Finally it was little Johnny’s turn to talk about his family and he very solemnly explained that his dad was a drug dealer and active in all sorts of other illicit activities, which understandably brought a hush over the discussion and stunned expressions from many of the children. Wisely, the teacher broke up the discussion and took little Johnny aside to ask him if this was really true and if there were anything he could do to help. Johnny responded by saying, “Oh no, none of this was really true. My dad is actually a politician in Washington, but I am just too embarrassed to admit that.”

Of course you can insert any occupation you want to ridicule into this story, but it would seem that politicians have often earned the right to be the butt of these kinds of jokes. The partisan political posturing that was on display this week would almost seem to assure that we will be given plenty of comedy material to work with next year.

With technically just hours to go before we could have faced another government shutdown, the House of Representatives passed a $1 trillion spending deal to keep the federal government operating through September of 2015. It is amazing to think that just a little over a year ago Ted Cruz did his Jimmy Stewart imitation with a 21-hour filibuster speech, setting the stage for the actual shut-down (reduction) on the 1st of October, 2013. I guess some things we want to just block out. Regardless, the 11th hour package that was passed Thursday night is referred to as a “cromnibus” bill as it contained both an omnibus spending bill for most of the government as well a continuing resolutions for other parts. My favorite analogy referred to it as a “Christmas Tree Bill” as politicians of all stripes were trying to hang their own personal decorations on it before the vote.

As you can imagine, within the 1,603 pages of this spending package there are provisions that have made both parties unhappy. But realistically, isn’t that what politics is about? I understand that from the right, there is displeasure that the topic of immigration has been pushed back well into next year, and on the left, revisions in Dodd Frank brought accusations that Citi Bank wrote the bill. Terms such as “blackmailed” into passage and “Wall Street gambling with taxpayer money” were bantered about but that really sound like political theater. The question now is, will the Senate also vote for passage or will they play the role of the “Grinch Who Stole Christmas” and force a shutdown for a second year in a row? There have been prominent voices from both parties that have stated they will not vote for the package as it stands, and as of the time I am writing this article, it has not been brought to a vote.

We all know that come January 6th, the 114th session of Congress will begin with a number of new faces and a much different complexion. I have to imagine this old group would not want to go out as the bunch that shut down the government yet another time so I suspect enough votes will be corralled for passage. That said, it would appear we have the potential for some interesting squabble and more than a few sarcastic jokes about members in the months ahead.

I have commented in previous columns that when you enter the holiday period there can be instances when someone or some-FUND throws a large order into the market which produces a surprise swing. It would appear that such an instance occurred during the overnight trade. Up until around 4:30 it appeared to be just another quiet evening of trade when a London Hedge fund embarked on a buying spree which sent prices for corn, wheat and beans all higher. For beans and wheat, prices remain contained in recent ranges but for corn, the buying carried us into higher highs for the move. The best I can tell, the buying was stimulated by the fact that China announced their trading quotas and import licenses for 2015 which is a routine and required practice but this time around was possibly interpreted by some as a signal that they were ready to become active in the US corn market once again. Now, maybe someone is holding some insight into the halls of the Peoples Republic and knows something that the rest of the trade evidently does not but considering that China appears to be having a difficult time managing the current inventory situation, it would seem to be a real leap of faith to believe they are ready to change their policies on US corn particularly when inventories are available elsewhere.

Today is the final trading day for December futures and we have March wheat currently at a 4-cent discount to Dec and March corn trading at a dime premium. The most interesting spread is over in meal where December futures currently carry a $32 premium but as we know, this has been the one market struggling the most to refill the pipeline this fall.

Monday will bring us two interesting reports; the FSA acreage update and the November NOPA crush report. The former will keep the acreage adjustment debate alive until the January final production estimates and will the profitable margin and available supply we could look at a record Nov. crush.

As a side note, there was an interesting story published by Bloomberg overnight about the sentiment in the bean market. They had surveyed 20 analysts concerning the bean market and found the 75% of 15 of them were bearish, 3 were neutral and 2 were bullish. This was the most negative sentiment that had uncovered in a survey since 2005. As we all know the bean market has been quite resilient over the past couple months and currently sits within striking distance of the highest levels since last summer. It would appear that the theory of contrary opinion has prevailed again. The challenging aspect of this though is that the overall fundamental picture for soybeans appears so overwhelmingly bearish, it is difficult to think that the strength is anything but temporary. Maybe we just need to see the sentiment turn bullish first. While not quite as overwhelming, in corn 10 out of 19 (53%) of analysts were negative and 12 out of 18 (67%) in wheat.

It has been an interesting week across many markets. Right now it would appear that grain and soy markets will be higher, equities and the dollar lower, livestock under pressure and crude oil down to the lowest point traded since the spring of 2009. I have to suspect we will see activity begin to wind down over the next few weeks as we wrap up the trading for 2014 but as witnessed overnight, there will also be potential for the unexpected swings in this era of fun(d) trading.

While maybe not quite a buy the rumor sell the fact type scenario in the grain and soy markets yesterday, it appeared to at least be a case of post report letdown (PRL). As we will cover, the domestic numbers at worst came in at expectations or were even positive but world numbers were anything but optimistic. As I have commented numerous times in the past, you have to keep providing a bull with fresh feed each day to keep it active and after the recent hype and run-up prices, this one appears to have been placed on a low-cal diet.

Wheat

The wheat trade was fully expecting to see a slight increase in the carryout projections and the USDA delivered exactly that with a 10 million boost to 654 million bushels. If there was a surprise in the estimate it was how that increase was derived. Export were left alone, which I believe will need to be cut in later reports but imports were boosted 10 million bushels. We know that recently there have been several cargoes of feed quality European wheat booked into the east coast so realistically; the number is difficult to argue with. The biggest surprise though was delivered via the world ending stocks as with a boost in the Canadian production and a slight cut in world usage, this figure was raised 2 MMT to 194.90. By historical standards this is not pushing against any kind of records as we have seen 200 MMT figures several times but it is the highest watermark in three years and another confirmation that there is a very comfortable supply around the globe.

Export sales were up 39% from last week at 442,300 MT or 16.3 million bushels and we even sold 3.1 million bushels for the 15/16 marketing year. The old crop figure was 16% above the 4 and the 10-week averages. With just less than half of the marketing year left, if we can average 11.5 million in sales each week, we would be at the target of 925 million.

While I continue to believe we have a major low in the wheat market, the 6.00 level should continue to provide formidable resistance and suspect we are now moving into a trading range for the weeks and possibly months ahead.

Corn

The domestic corn figures actually came in positive as we witnessed a 10 million bushel cut in ending stocks instead of the 10 million increase expected but as with wheat, the adjustment came via an unexpected category. Exports were left alone, which will leave them open to changes next month but the USDA saw fit to boost Food, Seed and Industrial usage by 10 million bushels. Your first reaction would probably be to guess that came via a boost in ethanol but that was not it. Corn usage for ethanol has already been increased 16 million over last year and the total Food, Seed, Industrial category is projected to be up 48 million. Most already expect the seed number to be lower for next year so that means usage in food and other industrial use, is projected to increase more than 32 million bushels. That seems to be quite a bit of extra sweeteners and corn flakes.

While not a huge change, world ending stocks were increased .7 MMT to 192.20 MMT. Argentine production was cut 1 MMT, Brazil was left alone but the Chinese estimate was boosted 1.5 MMT to arrive at this figure. As I said, this was not a major shift but if the trade looks at the overall number it is a reminder that this is a record raw number for ending stocks and the highest stocks/usage ratio since the 2001/2002-crop year.

Exports sales for corn were down 18% from last week at 962,800 MT or 37.9 million bushels. That said, this quantity was still 9% over the 4-week average and 4.5% over the 10-week average. The less than exciting part of the release was the fact that the top three purchasers are the three countries that we expect to consistently be good customers. Japan purchased 595.6k MT, Mexico 244.4k MT and South Korea took 122.1k MT.

The pressure in corn yesterday was really pretty insignificant and with the projected carryout now back below the psychological 2 billion point the report gave bulls nothing to panic about. That said, neither is there anything that you could deem bullish to the point that we should push and sustain corn through the 4.00 level. As with wheat, I suspect we are into more of a trading range at this time and should be set to at least see March futures reach down to the 3.75 base between now and the end of the year.

Soybeans

As I had commented early yesterday morning, the action in the bean market over the past week appeared to indicate there were some really expecting a bullish report. Realistically, they were partially correct as the USDA boosted exports more that anticipated but evidently no one was prepared for CONAB to boost Brazilian production estimates and it blindsided the bull.

The ongoing Chinese demand prompted the USDA to boost exports by 40 million bushels vs. the expected 20 million kick and with no other changes, this figure came right off of the bottom line. While less than expected, we do need to keep in perspective that this figure is nearly 4 ½ times larger than last years carryout and is a very ample supply of beans. On the USDA world estimates, the carryout was reduced .41 MMT primarily reflecting increased usage but as I said previously, the surprise left hook was delivered by CONAB. They released an updated production estimate of 95.8 MMT compared with a previous guess between 89.3 and 91.7 MMT. If realized this would be an increase of 11% over last year and is 1.8 MMT above the current USDA estimate. To a certain extent, I do not know if this matters much on the world balance sheet as if the carryout is 89.87 MMT, which is the USDA estimate or 91.5 MMT, it is still a new record by a wide margin. The previous high water mark was set in 2010/11 at 71.72 MMT with a stock to usage ration of 28.52%. The current will be somewhere north of 31.5%. Yes, we all know China appears to have an insatiable demand for beans at this point but we also know that once they have secured the inventories they are after, the buying could dry up dramatically.

While certainly not disastrous, sales did slip this past week to 810,300 MT or 29.8 million bushels. This number is down 31% from last week, 20% below the 4-week average and 32% below the 10-week average. While I do not have the numbers in front of me, I cannot remember the last time China was not the largest purchaser but this past week Spain was on top at 257k MT, China number two at 217.2k MT and Japan at 74.7k MT. It is interesting to note as well that within the number to Spain, 58.4k MT were a switch from China.

The reversal in beans posted after the report would seem to suggest the rally is complete but we have not really seen any major follow-through so far this morning so the bulls have not completely surrendered yet. That said, without a weather disruption now in South America, it would appear the odds are stacked heavily against him.

As I have noted in previous comments, it seems that over the past several years markets have begun to place in inordinate amount of attention on the monthly USDA reports. Granted, they are basically independent and hence theoretically unbiased and have a tremendous database from which to draw statistical information from. That said, this is not exactly Moses coming down from Mount Sinai carrying the 10-commandments that we need to accept as infallible law. I will have to look closer this time but I do not believe that the first line on supply/demand reports reads, “I am the USDA and thou shall have no other agricultural agencies before me.”

Regardless, as long as the markets in general want to focus on every word from the government, we need to pay attention as well. Generally the December reports are a non-event, and this one very well may be as well but gauging from the overnight action in soybeans, there are some who are betting otherwise. Realistically, next Monday the NOPA crush release and the FSA acreage update could provide as much if not more insight but today we wait for Washington.

Wheat

The wheat market took a bit of a hit yesterday and while the action in Chicago was no more severe than the setback witnessed last Wednesday, with the overnight pressure it would appear that we are tipping the scales lower. The disappointment that appeared to create the selling was a statement by Russia’s Deputy Prime Minister that they did not intend to meddle with exports. Outside of this, with non-threatening weather pretty much anywhere around the globe right now and the fact the US wheat remains a premium to Europe and Russia, there appears to be little reason for the bulls to hang around.

While I would be surprised to see anything out of the ordinary later this morning the trade estimates for report have domestic carryout between 651 and 654 million bushels compared with November at 644 and world ending stocks at a comfortable 191.8 MMT down from 192.9 last month.

Corn

The corn market shook off the negative action from Monday with a higher close yesterday but overall, we remain within the same trading boundaries that we have now since early October. In addition to the supply/demand estimates today, we will also receive the weekly ethanol stats and with continued solid margins, there is no reason that will not be consistently strong. As I have pointed out previously, we need to keep an eye out for inventory build as not only is the blender not making money, export interest is slipping. CONAB also released updates for the Brazilian crops today but I cannot imagine will hold many changes.

Average estimates for the supply/demand report has domestic ending stocks between 2.018 and 2.027 billion compared with the November estimate of 2.008. World stocks are expected to come in around 191.4 MMT, which is virtually unchanged. As I have mentioned previously, next Monday the FSA will release updated acreage numbers and seeing that these have been a point of contention for months now there is no reason to believe they will not be again. I am in the camp that believes the USDA will make only minor changes to harvested acreage in January but I suspect the report will keep the pot stirred between now and then.

Soybeans

While the gains in the bean market were not huge yesterday, we closed higher nevertheless and with the overnight strength have seen nearby futures poke into the key overhead resistance zone between 10.50/10.55. Nearby meal futures have led the advance. As I commented yesterday, this market would appear to have a dichotomy between the overall negative fundamentals and positive technicals and the jury is still out as to who might win the battle. The report today could provide the decisive input but there is certainly no assurance that will be the case either. It is generally assumed that the USDA will increase the export pace and lower the carryout so unless there is a larger shift than expected, we should have that filtered into the price already. The average estimates for domestic carryout are between 427 and 431 million compared with 450 in November. World ending stocks are estimated to come in around 89.7 MMT, which would be down .6MMT from last month but still at a record by a wide margin.

As with the corn market, reports to be released next Monday could have more barring in the market than what is to be issued today. In addition to the FSA acreage number we will also see the November NOPA crush data, which should be large but once again, expected. On top of all of this, as we move further into December, it is normal to see volume thin out which can at times create even greater volatility in price swings. This could be an interesting December.

The wheat market was able to close higher for a third day in a row yesterday but lacks any type of follow through during the overnight hours. The recent action continues to appears more technical than fundamental as there is little market moving information circulating right now.

Export inspections were once again sluggish as we loaded just 9.9 million bushels last week. This compares with the 10-week average of 12.5 million. Year to date we have shipped 678.9 million bushels and to reach the USDA target of 925 million we need to average 18.8 million per week moving forward.

There remains some discussion of winter kill in Russia but with moderating temperature across the Northern Hemisphere it may be a challenge to get much mileage from that story. Russia now says they are not planning to place any additional taxes on exports. On the other end of the globe, harvest is progressing in Australia and I read has moved beyond the 60/65% mark. No surprises in overall yield particularly since ABARE lowered the crop estimate last week.

This leaves the December supply/demand estimates as the key topic and I do not believe anyone is looking for earthshattering changes to be announced. The Wall Street Journal released their analyst survey yesterday, which we participate in, and came up with an average estimate for domestic carryout at 651 million bushels. This is slightly below the Reuters estimates but would still be a 7 million bushel hike from the November report. It would appear that March wheat should continue to encounter tough resistance at the 6.00 mark.

Corn

The corn market was not able to maintain the early gains yesterday and as expected encountered formidable resistance against the 4.00 level once again. While we certainly have not collapsed overnight, we have posted the first lower lows now in the past three sessions. Realistically, corn does not have much more to focus on that wheat does at this point.

The October export census numbers were released yesterday and for the month we exported 144.3 million bushels. This number was 14 million bushels higher than last month but 15 million less than September. Granted, we recognize that beans have been hogging all the port capacity but the November numbers should not reflect improvement either. Last week we loaded 21 million bushels, which was down almost 30% from the previous week and 13% from the 10-week average. Year to date inspections have totaled 272.18 million bushels for an average of 19.4 million per week. To reach the USDA target of 1.75 billion this weekly average will need to increase to 38.9 million moving forward. That would appear to be a tall order.

It is understandable why many analysts are looking for the USDA to begin trimming the export forecast but the question is, will that happen before or after the end of the year. According to the Wall Street Journal survey, the average trade estimate for carryout stands at 2.018 billion, which would be up 10 million from last month. While I believe exports have to be trimmed, if they made no changes tomorrow morning it would not be a shocker.

After the release tomorrow, the trade focus should quickly turn to the grain stocks estimates as well as the final production numbers. To keep things interesting though, we do have one more FSA estimate for acreage, which will be released next Monday. There is a possibility that could add enough uncertainty to keep both bears and bulls uncomfortable and leave us range bound into the end of the year.

Soybeans

Beans continue to be a curious market. We are staring at what appears to be overwhelmingly bearish fundamentals but here we are once again poking up against key overhead resistance and this after a pretty solid break a week ago. It has always been my philosophy in markets that the fundamentals provide the foundational framework but you have to watch the technical for early tip-offs for changes. The belief is we can never know ALL the underlying factors and shifts and that the technical action will reflect changes before the fundamental. One of the key signals of this is when markets do not react in a fashion that would appear rational with the given information. While I am not ready to say that is truly the case for the bean market just yet, the continued resiliency most certainly has my attention and if we begin seeing January futures close consecutively above the 10.50/10.55 level, it would suggest that the bulls are still in control.

While this is not fresh news, the one factor that we can point to in beans has been the exceptional export pace. The October census data reports that we exported 335 million bushels for the month, which was 60 million above last year and a new record. The November numbers should be even higher and inspections for the week ending 12/04 came in at 81 million bushels. This was just ahead of the 10-week average and once again was more than double the combined corn and wheat inspections. As has been the case, the lion’s share of the business is with China and this past week they were on the receiving end of 60% of the total.

With 38 weeks left in the marketing year we could see the number drop sharply once South American supplies grow but if you can make the case that corn exports can be trimmed the same reasoning would say beans numbers should be boosted. According to the Wall Street Journal survey, the average trade estimate for ending stocks stands at 431 million bushels, which would be 19 million below last month and should reflect an export number of around 1.72 billion. Let’s not lose sight of the fact that this would still be a very comfortable inventory of beans domestically and we are dealing with a record world inventory.

Nothing has changed in the South American outlook so for the time being we will have to deal with this dichotomy between fundamentals and technicals. I would seriously doubt the report tomorrow will do much to clear the air so we have to remain patient and allow the market action tells us which way to turn.

The wheat market has witnessed two-sided action as we kick off this new week and have posted higher highs versus Friday. This still leaves us shy of the highs posted last week, which for March futures stand up at 6.11 ¾. Most of the enthusiasm that pushed prices higher on Friday appeared to stem from rumors in the corn and bean markets but with little else to focus on in wheat, appears to be tugged along for the ride.

With no serious weather threats around the globe right now and the U.S. remaining in a less than competitive position, the strength would appear to be mostly technical but we could hold these ranges now through the December supply/demand reports to be issued on Wednesday morning. Reuters released the results of a survey they have conducted and come up with a 2014/15 wheat ending stocks estimate of 654 million bushels. This number would be 10 million bushels higher than the November estimate and with the sluggish export numbers posted to date would be quite understandable. The average estimate for world ending stocks came in at 191.8 MMT, which would be down 1.1 MMT from the November number.

Barring any positive surprises on this report I believe it is going to be challenging to extend or even sustain the current rally. The 6.00/6.10 zone should be formidable resistance for some time.

Corn

The corn market uncovered a bout of fresh buying on Friday in response to rumors that China could once again be interested in DDG’s from the United States. We have been able now to extend the strength with the announcement of a sale of 136k MT of corn to Japan this morning. It would seem to be somewhat of a stretch to believe China will be back in our market with the GMO issue still unsettled but as I have commented many times before, the resistance on their end would appear to be more about managing inventories than any real problems with genetics.

The strength this morning has pushed futures back up against the mid-November highs and it would appear that the report could provide a make or break setup for this market. That in itself is unusual as the December reports are normally a non-event as we look out to the January final and the quarterly stocks estimates. The average estimates from the Reuters survey are as follows; Domestic corn ending stocks at 2.027 billion bushels, which would be up 19 million from November and world ending stocks at 191.4 MMT, which would be down .1. Neither would be market-moving changes and would suggest we have ample supplies of product around the world this year. One of the stories the bulls continue to tout is the belief that we will see further cuts in the harvested acreage number come January but we will need to wait another 30-days to find that out.

Like wheat at the 6.00 level, I continue to believe that corn will be encountering very stiff resistance here at the low 4.00 zone. While there could always be a positive surprise come Wednesday and more rumors could pop up here and there as well but for now, I believe it will be challenging to sustain this range let alone advance further if we do not feed the bull every day.

Soybeans

Additional stories that China was extending bean coverage into January/February helped reignite buying on Friday and we have extended the gains this morning with an overnight sale of 130k MT of bean to Spain. I find it a little curious that we would stimulate quite as much strength as we did on the China talk as no one has suggested the have completed their buying program for the year. That said they should be towards the tail end though and should see tapering in the weeks ahead barring a weather scare in South America.

Along those lines, it is reported that Brazil has reached the 92/93% complete market for bean plantings and Argentina has moved up to 54% complete which is actually a few percentage points ahead of normal. The weather forecasts for both countries were generally favorable.

According to the Reuters survey, the average trade estimate for Wednesday has the projected domestic ending stocks figure at 427 million bushels vs. the last report at 450. Now, lower carryout as a rule of thumb should be positive but this is still a more than an ample supply of beans. The average estimates for world ending stocks are a touch lower as well standing at 89.7 MMT vs. the previous report at 90.3 MMT. Any way you slice that number, it is not friendly.

Beans have also pushed back against what has been key overhead resistance and like the other markets, are going to need consistent reinforcements in the days ahead to maintain this advance.

Independently, the wheat market did not appear to have much going for itself yesterday. Export sales were sluggish and cold temperatures and the threat of winterkill across the Northern Hemisphere has been tempered at least for now. On top of that, Stats Canada released crop estimates that were higher than expected. Regardless, after the early morning pressure selling dried up and once the corn and bean markets began to advance, shorts in this market headed back to the relative safety of the sidelines.

Values are soft overnight with slack news once again. It is interesting to note that unless March futures continue lower and finish below 5.78 ½ we could still post a higher weekly close but sustaining this level could be the challenge again next week. We have the December Supply/Demand reports scheduled for this coming Wednesday, which should not hold much potential for any major changes but prices could chop around the current level until that is released. Lacking fresh positive news, I suspect we should see prices slip lower then in the weeks ahead.

Corn

The combination of the solid export sales yesterday and the consistently good ethanol grind the day prior appeared to be enough to lift the corn market higher yesterday. Funds were estimated to have purchased around 11,000 contracts adding to an already sizable long position for this time of year. Overall this leaves the corn market in a sideways pattern where we have been trading for over two months now. Kind of like a dog that is distracted by every squirrel that runs by, the markets jumps up and down with each bit of news that is released but ultimately remains trapped in the yard.

There would appear to be very little market moving news this morning. The biggest release of the morning was the monthly jobs data. The unemployment rate remained unchanged at 5.8% but the US did generate another 320,000 jobs in November, which should help keep the rally alive in the Dollar.

News from South America remains generally favorable for getting this crop off to a good start. It was reported yesterday that the state of Parana in Brazil has completed corn planting but acreage was down 20% from a year ago. Of course that would mean more beans went into the ground.

While funds have certainly provided the buying to sustain this rally I continue to believe it will be increasingly difficult to defend that position as we edge closer to the end of the year. Granted, when volume slows down in holiday trade we can at times be surprised with moves but I suspect if the USDA does not provide any surprises on Wednesday, we will still see prices track lower into the end of the year.

Soybeans

At midweek it really appeared that the bulls had been pressed against the ropes and we ready to go down for the count. Always the scrapper though they rallied back once again and it would appear the fight is ready to move into extra rounds again next week. If January futures close today above 10.14 we will actually finish higher for the week.

I have been searching for solid rationale for the rebound over the past couple days and outside of the solid export sales reported yesterday morning am having a difficult time finding much to work with. News from South America suggests great planting progress and favorable conditions ahead. The positive employment numbers this morning has provided the dollar with renewed buying vigor and we have extended into higher highs for the year once again and to the highest levels witnessed since 2009.

If we hold, this would mark the third day in a row of higher closes and I suspect it will be a challenge to sustain that strength after the weekend. There are some in the trade expecting to see the USDA lower carryout productions next week and failure to meet those expectations could be met with disappointment.

With stories such the talk of a Russian export tax largely discounted for now the wheat market had little left to provide buying incentive and prices turned lower yesterday and continued in that same direction overnight. The fact that US wheat carries quite a premium to the rest of the exporting world and that the most recent Egyptian tender went to Ukraine and Romania helped reinforce the break.

While not necessarily a market mover, there was an interesting story published yesterday concerning quality complaints about Canadian wheat. According to the story, importers have been unhappy with the protein and gluten content and the general quality. The issues appear to have been on the rise since 2012 when the government changed the structure and responsibilities of the Canadian Wheat Board. This sounds eerily similar to the US grain export trade back in the late 1970’s. At that time the US had begun to receive quite a bit of criticism about grain quality and while there were certainly some abuses that were taking place and improvements were needed in the handling systems, a large part of the problem stemmed from the fact that we had learned to deliver the quality that the customer actually paid for. Many importers had grown accustomed to buying a lesser quality product but always receiving something higher. As capacity throughout the marketing chain increased as well as the blending capability the buyer began getting exactly what they paid for and did not like the change.

STATS Canada did release updated 2014/15 crop estimates this morning and now place total wheat production at 29.28 MMT which is up 1.9MMT from their previous report 1.8 MMT above the last USDA estimates.

Export sales did not offer much for the bull to hold onto either. Sales for the week totaled 319,200 MT or 11.73 million bushels. This number was down 26% from last week and 14% from the 4-week average. The top buyers were Japan with 223.1k MT, Mexico with 40.8k MT and Panama taking 38.7k MT.

Corn

After the early morning selling yesterday it appeared to thin out in the corn market and we were able to bounce back to the unchanged mark for the close. While the news should not have been surprising, part of the rebound was attributed to comments made by a Monsanto representative speaking at Citi Bank investment conference who stated that seed corn sales for 2015 were lower than the prior years’ pace. As I said, this should not have been a major revelation to the trade but was enough to bounce prices away from key support levels.

As expected the weekly ethanol numbers were a bit lower than the previous couple weeks but were still solid at 282,828,000 gallons which should equate to over 101 million bushels of corn. Inventories were unchanged but with ethanol trading at a premium to RBOB and the fact that it is again economically viable to import ethanol, I suspect those inventory number will soon build.

Solid week for corn sales as the US moved into a competitive position with much of the exporting world. For the week we sold 1,170,700 MT or 46.1 million bushels. This figure was up 24% from last week and 65% above the 4-week average. Top purchasers were Mexico for 304.4k MT, Japan with 236k MT and Peru taking 131.3k MT.

Soybeans

After pressing down to the lowest levels in over a month yesterday, the selling appeared to dry up and beans were able to snap back for a higher close on light volume. I do not see any specific news story to attribute the bounce to but funds were reported to have purchased around 3,000 contracts and while technically you could say we have posted consecutive closes below 10.00, it was pretty borderline.

Beans sales slipped some from previous week but were still solid at 1,179,700 MT or 43.35 million bushels. This was down 16% from last week but 5% above the 4-week average. China was in for 767.8k MT or 62% of the total followed by Germany for 157k MT and Taiwan at 118.1k MT.

Technical – January beans were able to rebound from the lows yesterday to reach back and test the 10.00 zone once again but with no follow-through overnight. While bulls may be able to take some comfort in the fact that we did not witness a major washout when support was violated but there is nothing in the action that you could defend as positive at this point. Intermediate indicators continue to point lower so unless we can begin closing consecutively back above 10.00, it would appear we have room to continue lower into the end of the year.

On Monday this week markets were all abuzz when the US Dollar broke and crude oil and metals rallied, which in turn helped pushed the grain and soy markets higher. Was the deflationary trend finally over? At this point, it would appear we were looking at a something more akin to a 1-hit wonder as we have unwound much of that move. This is not to say that we are not very close to discovering a low in the overall commodity indexes and I for one am in the camp that believes this will have been accomplished by the end of this calendar year. That said, turns in commodity markets normally come in fits and starts and for that matter, some will remain in bear markets for sometime to come. The reality is, it is not unlike turning a ship, it will take time to change direction especially considering how full we have it loaded this time around.

Wheat

Wheat has continued to be the stellar performer this week and even though we finished lower yesterday and have witnessed pressure again overnight, we have surrendered very little of the advance of the past few days. All that said, I believe it will be challenging to sustain these gains. As I noted yesterday, the fund buying should now have them back to a neutral to possibly even slightly net long position for the first time since spring. While there is nothing that would say they cannot continue to add to longs at this time, with end of the year accounting coming up fast and really little in the fundamental picture to support such, it would seem unlikely.

The recent advance has pushed US wheat further out of contention in the world market. Of course part of the stimulus this week was discussion of Russia imposing an export tax sometime in 2015 but there is no assurance that will ever happen and even if it did, the majority of their wheat exports would have been completed. There is already some pushback as well as Russia’s National Exporters Association has asked the government not to do anything to hinder export business.

ABARES, the Australian version of the USDA did release updated crop estimates yesterday and lowered their wheat estimate to 23.2 MMT which moved them below the most recent USDA figure of 24. The change was anticipated. Stats Canada will release updated number on Thursday.

Last but not least, one of the positive stimuli that has aided the recent strength has been the abnormally cold temperatures in the United States and Eastern Europe/Russia. I read overnight that Chicago recorded the 8th coldest November on record and the first few days in December have been pretty nippy for many as well. That said, a few meteorological services are cautiously suggesting that temperatures appear set to moderate to more normal levels in the months ahead both here and abroad, partially aided by the developing El Nino.

While I continue to believe we have a major low in the wheat market, it would appear that with ample world supplies and tough competition, this initial rally may have gotten ahead of itself for now.

Corn

While the advance in wheat has likely helped support the corn market, independently it would appear to have little strength at this point as evidenced by the break yesterday. We have yet to violate key underlying support but with the overnight pressure are edging towards the edge of that cliff.

While world corn production does not appear to be threatened anywhere around the globe right now unlike wheat, US corn is very competitive for the short term. I cannot say if the trade will look beyond this particularly if we can post a couple weeks of better than average export sales but the market will provide the answer as we see if the 3.60 level in spot futures can hold or not in the days ahead.

Weekly ethanol numbers will be released later this morning, which should be solid once again but specific attention needs to be paid to inventories. With exports slipping and blenders losing money this should be the first telltale sign that peak corn usage could be behind us.

Overall the news for corn is pretty stale right now and without something fresh the attention will most likely shift to end of year positioning and discussion/debate as to what the January production and supply/demand report may hold in store.

Soybeans

With little left to feed the bull outside of stale Chinese fodder, selling in the bean market intensified yesterday and has continued once again overnight. While it is difficult to call it anything more than a technical correction at this point, there would appear to be potential for it to develop into something more.

At this point we have no weather issues in South America and while export sales should have been decent for last week we should see these numbers begin dropping consistently in the weeks ahead as the Chinese buying should be wrapped up. The meal market continues to be the hold out right now as we have been able to hold above key levels of support. Funds remain long meal but for how much longer is debatable in face of lack of supply issues domestically and the end of the year approaching. I suspect if spot meal futures press below 365 in the days ahead, bulls will be rushing for the exits in both meal and beans into the end of the year.

The wheat market provided the first surprise for the month of December as fund buying shot prices up to the highest levels witnessed since July and August of this year. Russia was the hot topic as it has been so often in the wheat market this year and this time rumors that they could curtail exports in the weeks and months ahead provided incentive for the last of the fund shorts to exit. It is estimated that they purchased in excess of 13,000 contracts on Monday, which will have potentially moved them to a flat and possibly even slightly long position for the first time since spring. Also helping with the rebound yesterday in not only wheat but tugging corn and beans back to the unchanged levels was a turn around higher in energies and metals after the recent rout and a setback in the dollar. All that said, there has been very little if any follow-through in all the aforementioned markets overnight.

As impressive as the move was yesterday in the wheat market, it is challenging to find much rationale for continued strength. This move has pushed US wheat further into an uncompetitive situation in the world markets. There were reports again yesterday that another cargo of feed quality wheat from Europe was booked for delivery into the Eastern US. That could be more of a negative for corn than wheat at this point but reflects that there is really no problem securing wheat regardless of the speculation about what Russia may or may not do.

This was at least partially bore out again with the weekly inspections. For the week ending 11/27 we loaded 10 million bushels, which was 40% below the previous week and 25% below the 10-week average. For the marketing year to date we have shipped 446.22 million bushels or 17.2 million per week. To reach the USDA target of 925 million we need this pace to average 18.4 million for the remaining 26-weeks.

There are always caveats that can upset the apple cart such as these Russian rumors or possibly an Australian weather concern but this additional advance has pushed us into levels of tough overhead resistance and a pretty clean slate for the funds. Would they really move to the long side of the ledger with less than a month to go in the year? Always possible but maybe not probable.

Corn

All the exciting buying in wheat and the turn around in metals and energies provided the corn market with some renewed buying interest yesterday but the net result was by no means a game changer. As would be expected prices have struggled in the overnight hours. Funds are currently holding a long position in excess of 200k contracts, which could become increasingly difficult to defend without some fresh news to provide the ammunition.

Now that the beans are not hogging all the port capacity we have seen a little uptick in the corn inspections and this past week we loaded out the most corn in the past 7 weeks with a number of 29.3 million bushels. This was 40% above last week and 11% ahead of the 10-week average. Inspections for the year to date have reached 321.08 million bushels, which is now 36 million bushels or 11% ahead of the same time last year. All that said, year to date we have shipped 27.5 million per week and we will need to see this average bump up to 35.7 million to reach the USDA target of 1.75 billion.

We are beginning to hear a little increased discussion about what could be in store on the January final production reports. While I suspect most will not be anticipating much of a change in yield but there are some who still believe the USDA will trim harvest acreage. While the possibility exists, I suspect the government would also ratchet usage lower via exports and feed usage were that to be the case.

Unlike wheat right now, US corn is competitively priced in the world market on a FOB basis which could help prop up near-term demand. That said, no one need hunt very hard to find available supply.

Soybeans

All the commodity buying excitement helped lift the bean market into positive territory and off critical support but the bounce was pretty meager. The line drawn in the sand right now is just below us right at the 10.00 level and if/when violated we could unleash a big round of long liquidation.

When you load more soybeans in a week than corn and beans combined, it is difficult to say that is disappointing but the 67.9 million bushels posted for inspections was the lowest number in the past 7-weeks. That figure was a solid 20 million below even the lowest estimates, was down 44% from last week and 7% below the 10-week average. Granted, we need only average 23.5 million per week moving forward to reach the USDA target of 1.7 billion but such a sharp drop off in one week does raise a few eyebrows.

The weather outlook in South America appears to be generally favorable with frequent showers in the forecasts. There is certainly no guarantee that this cannot shift but without an issue developing there, it should become increasing difficult to defend the bull story.

World trade should be back in full force after the Thanksgiving break but it would appear that we have little more news to discuss this morning than last Friday. Of course the crash in the crude oil market after OPEC failed to trim production pulled on markets Friday and while energies are under pressure overnight, it is relatively insignificant at that point. I suspect that lighter volume trade last week allowed the pressure in the bean market to extend just a bit further than was reasonable and the strength in wheat the same but it would look as if we are correcting the possible imbalances overnight.

Wheat

Wheat appeared to find strength late last week from concerns about the lack of snow cover in both the United States and the FSU and Russia. While understandably winterkill is a concern and should help keep a certain amount of selling away, I doubt we can sustain a rally much longer with that story. Also providing a little extra incentive on Friday was a report that a Russian deputy Ag minister had made a comment that export tariffs may need to be implemented to counter the depressed Ruble but it would appear this would be a case of too little to late.

There is potential to see March wheat possibly take a poke up at the 6.00 level before this move is complete but I expect that we will find our reaction highs during this coming week.

Corn

It appeared last Friday that the corn market was torn between the pressure in beans and energies and the strength in wheat and the decent export sales but we still managed to finish with a slightly higher weekly close. Overnight we have been under pressure and while not heavy, with little in the news that appears supportive, it may be a challenge to hold current levels much longer.

In many respects, it is a little surprising that corn has done as well as it has in light of what has happened with crude oil. Remember just a few years ago we traded corn more like an energy market than a feed grain? Part of this could be the fact that profitability for ethanol producers and hence the grind has remain stellar but with ethanol priced above RBOB I cannot imagine the blender will support these values and I suspect will be using RINs to cut back.

Outside of this, news appears to be a bit thin this morning. There is nothing out of the ordinary lining up for export tenders and of course we will see weekly inspections released later this morning. I have noted before that the corn market seems to have a tendency to poke in reaction highs or lows around the beginning of the month and without something fresh to reinvigorate the bull it would appear we should be ready to head back lower.

Soybeans

As I commented in the initial paragraph, the bean market probably suffered additional losses due to the lighter holiday volume on Friday and after opening weaker overnight, we have seen a slight rebound. The question would be can we hold strength for any length of time?

The overall weather in South America continues to be favorable for getting this young crop on the way and rains could even be hindering the planting in a few regions. I understand that the Argentine planting has reached to around 45% complete and Brazil 85% complete each just a mere 4% behind last year.

As has been the case, China remains the wild card in the bean picture. Will they continue to book aggressively in the weeks ahead or have they reached their targets? When you look at the number of ships headed their way already and what could next turn into a port congestion and demurrage issue, it it difficult to believe buying will continue for much lower.

Everyone will be watching the 10.00/10.05 level very intently in January futures and if that barricade fails to hold, another long exodus could ensue.

We all have many things to give thanks for as we celebrated Thanksgiving this week in America; among them was a little positive economic news to add into the mix. On Tuesday the 25th, the Bureau of Economic Analysis released the second estimate for the third quarter GDP, bumping the number up from the previously released 3.5% to 3.9%. This added to the already solid second quarter growth of 4.6% and gives us a combined 4.25% for the past six months, the strongest number posted in a decade. Part of what makes this growth stand out is the fact that the rest of the world is not sharing in the optimism. Europe as a whole is barely keeping its economy above water, Japan has slid into a recession and the Chinese economy, while continuing to grow, has lost tremendous momentum, as have the other BRIC nations.

Consumers were active once again as personal consumption expenditures were up 2.2% after a 2.5% boost in the second quarter. You have to imagine falling gasoline prices have provided a nice boon for consumers. Where the average American is not spending money is in housing which continues to lag other sectors in the rebound. Residential spending was actually down .8% from the prior year, extending a lackluster record for the year. The wounds suffered by the consumers here will not heal quickly. The real performer for the quarter though was the federal government. Government consumption expenditures were up 9.9% over the previous year led by the National Defense, which posted an increase of 16%.

No sooner had the numbers been released were there economists warning that the fourth quarter would not look quite as promising and we could see growth slip back closer to the 2.2 to 2.5% level. Part of the rationale here is that government spending will be slowing back down and the export side of the US economy will be facing real headwinds as other countries struggle and the U.S. dollar continues to accelerate. During the third quarter, exports of goods and services did expand by 4.9% over a year ago, but this was already down from the 11.1% increase that had been posted in the second quarter.

If economists are correct, this would mean that for the year the U.S. economy will have grown right around the 2% range. While it is growth, the increase continues to lag the real potential. Once again I come back to prediction made five years ago by Bill Gross that we were headed in to a “new norm” of slower overall growth. Many scoffed at the idea at the time, but unfortunately he appears to have been proven correct. The debt we have accumulated and continue to accumulate should likely continue to act like an anchor holding us back.

I thought it might be interesting to see what this looked like in a graphical form so I plotted the Real GDP against the Total Public Debt looking back over the past 40 years. While we have experienced seven slowdowns or recessions during that time frame, what does seem to appear obvious is that since the 1980’s, when the federal government really began to embrace deficit spending, the recoveries have been shallower. Granted, increasing debt cannot be the sole reason and the larger an economy becomes the more difficult it is to produce large growth numbers. Regardless, the trend does not appear positive. Just looking out over the next 12 months there are a number of “Fiscal Speed Bumps” as they are referred to by the people at Fixtthedebt.org[1] ranging from the resolution to fund the government expiring, the debt ceiling being reinstated, the cap on spending ending and the Social Security Disability Trust Fund exhausting. Each of these, as well as a few others, will demand additional borrowing by the Federalgovernment unless accompanied by some form of revenue enhancement, which is more commonly known by the evil words Tax Increases. Without complete reform, this should create even more drag on the possible growth.

For much of the past year, Washington has been engrossed in an election and as such many of these more unpleasant responsibilities have been pushed onto the back burners and out of the collective mindset of the public and politicians. It would appear that is once again time to face the music and I suspect 2015 could once again be a very interesting time in our nation’s capital.

We have grown so accustomed to seeing overnight trade it feels incomplete to not wake up to price movement but that is what we contend with this morning. Granted, post Thanksgiving action can be quite subdued and this especially because the grain and soy markets will only be open for 3 ½ hours today but trade there will be.

Outside of the weekly exports sales report it seems the biggest news that we have to contend with this morning is the news from the OPEC meeting that the cartel will not cut production to try and shore up their sinking fortunes. It is not that a number of member nations were not in favor of doing so but the largest producer, Saudi Arabia, blocked the move. Instead of the 1970’s philosophy of tightly managing output in an effort to push prices higher, the current is to push prices low enough to make it economically unfeasible for some to produce. We all know the old saying about the best cure for low prices is low prices and it would appear the Saudi’s are prepared to find out if that holds true in petroleum as well as other commodities as it is estimated the world is production around 1 million barrels a day more than is needed. The news did spike prices lower and pushed spot crude below $70 a barrel for the first time since the spring of 2010. For several weeks I have felt that we have crude into the final stage of this downswing and this panic flush lower just reinforces that belief. With the new lows posted overnight, there is potential to see us poke down to the $64 level but I continue to believe we will have a major low in place by the end of the year.

The flush in the energies markets had everyone leaning towards a weak open in the grain and soy markets but the exports sales report should help shore up the opening. The breakdown is as follows;

Corn posted total sales of 944,900 MT or 37.2 million bushels. This number is 4% above last week, 59% above the 4-week average and 10.6% above the 10-week average. The top purchasers were unknown destinations at 243.2k MT, Japan at 152.6k MT and Columbia with 133.8k MT. Year to date we have sold 849.5 million bushels which is still around 13.5% behind that pace last year. While not a standout bargain, US corn is at least competitive on the world stage currently.

Beans sales bounced back quite well after last week as we sold 1,485,400 MT or 54.6 million bushels. This number was three times the figure last week, 34% above the 4-week average and 10.5% above the 10-week average. This week China accounted for 54% of the sales taking 806.2k MT followed by the Netherlands at 147.2k MT and then unknown destination at 112k MT. The only caveat to report was that we posted a negative 22.3k MT sales figure for meal.

Wheat even caught an uptick in sales as we sold 431,500 MT or 15.9 million bushels. This was 19.5% above last week, 16% above the 4-week average and 3% above the 10-week average. Top purchasers were Japan with 131.8k MT, Taiwan at 84.3k MT and Indonesia with 49.5k MT.

There is always potential for unusual swings in holiday shortened trade and with the generally solid export sales we could see two-sided action but overall there appears to be little that would be considered earth moving in the news today.

The overall new is quite sparse here in this pre-Thanksgiving Day trade as is evidently the volume of trade. Holiday trade can either be really boring or exceptionally wild as large orders can create swings but ideally it will be the former here today.

Wheat did catch a nice little rebound yesterday and again overnight on renewed concerns about snow cover and cold temperatures in Eastern Europe and Russia. It almost seems like the bulls pulls this story out of their pockets each time the news begins to run dry. While it has produced limited rallies, they have never garnered any traction, which appears to be the case here again as prices have faded in the morning trade.

Normal trading hours today but grains will not reopen until 8:30 on Friday morning and will then close at noon on that day. This, combined with the first notice day for December futures on Friday should keep most of the action limited to position squaring and possibly pre-hedging but this more so in corn and beans.

Corn

The corn market has been successful in building just a bit on the rally we witnessed yesterday but overall we remain well within the trading ranges we have been trapped in for the better part of this month. With the extended break in trading, which after the close will not resume until 8:30 on Friday morning I do not envision that we will get carried away to the upside today and could even see a wave of pre-hedging late.

One of the bigger stories that appears to be making the rounds this morning is that China will begin its annual intervention program to purchase corn from producers. They have been doing this now for the past seven years and it allows the government to manage stockpiles but that has become less of a concern after several years of solid production. It is projected that between now and April the government will purchase 40 million tonnes of corn which is down from 60 million purchased last year. It is my understanding that one of the biggest issues being confronted in China at this time is a lack of quality storage. It is difficult to imagine China approving GMO varieties from the U.S. until they have rectified this situation.

As I mentioned under wheat, the first notice day for deliveries against the December contract will be on Friday and I suspect the majority of the trade will be evening and rolling positions.

Soybeans

While hardly a collapse, the bean market did not really encounter any follow-through buying from yesterday and has been trading defensively this morning. Realistically, it was a stretch to find decent reasoning as to why we rallied yesterday. Yes, the export inspection number was once again solid on Monday but as I have outlined before, seeing that the lions share of this is moving to China and in light of the wall of beans already moving in that direction, more and more people are beginning to accept that probability that these figures could drop off quickly and significantly. Evidently, some funds to not number with that group as they reportedly purchased around 9,000 contracts yesterday.

U.S. farmers have done a good job of holding inventory from the market but in the not too distant future that may not even be enough. Basis levels for meal while at elevated levels, appears to be slipping and processors should have enough inventory to at least carry them into the New Year. The domestic meal trade appears to be one of the few positive remaining factors and even that could slip down through the grate before long.

News from South America has changed little as planting continues to advance with overall good conditions so as we look out into the final month of the year, unless we can bring another fresh and positive story into the market, it would appear difficult to think we can maintain the current price levels.

While we have seen a rebound this morning, the wheat market is just dragging along at this point with little fresh news for either the bull or the bear. Bulls try and drum up support with discussion of the cold air in Eastern Europe and Russia offering the potential for winterkill and the bears quickly point to the ample world inventories and competitive pricing. It would appear understandable why closing prices for December future have been contained within a 14-cent range now for over a week.

The slight slowdown in bean export inspections allowed the wheat pace to pick up just a bit as we loaded 16.4 million bushels last week. This was the highest inspection in a month and was even above the 10-week average of 14.9 million. For the year we have now shipped 436 million bushels, which is down 32% from the same time last year. We now need to see an average pace of 18.1 million per week to reach the USDA target of 925 million, which is looking a bit questionable.

Emergence of winter wheat stands at 92%, which is 3% ahead of the normal for this date. Conditions did slip a little this week, which is the first change in the past three. The good/excellent rating slipped 2% and now stands at 58%. Last year at this time we stood at 62% in that category.

We have normal trading hours today and tomorrow but without something fresh to work with, I suspect the market will continue to drag. We continue to hover around the pivotal 5.46/5.42 range and above last week’s low of 5.32 but I suspect once we press below that low, sell stops will be found.

Corn

Realistically there is not much more feature in corn than there is in the wheat market. The pressure did not violate any key support yesterday but we are on the verge of rolling short-term moving averages lower and it would appear it should be just a matter of a few days before the bull capitulates.

As of Sunday the corn harvest reached 94% complete which is actually 2% above the average for this time of year. Michigan and Wisconsin are the only two states that are significantly behind average show 69% and 73% complete respectively. All told, we should have less than 850 million bushels to harvest.

I suspect the bigger question right now will be as to when will we see bushels begin to find their way into the marketing channels. Farmers have done a very respectable job of holding inventory back through harvest but cash flow needs and tax planning will take precedence soon. Combine this will the enormous amount of grain that is out in temporary storage this year and we could see harvest arrive in December and January.

Export inspections bounced back a bit this past week but are still nothing to write home to mom about. For the week ending the 20th we loaded 20.9 million bushels. While almost 30% above the previous week, which happened to be a marketing year low, we were still 20% below the 10-week average of 26.4 million. For the year to date we have shipped 327.76 million bushels and will need to step up the average to 35.6 million bushels moving forward to reach the USDA target of 1.75 billion.

Soybeans

While it just lifted prices from the extreme lows yesterday, beans appear to be catching a little demand inspired bounce here in front of Thanksgiving. Seeing that we remain well within recent ranges, the bigger question will be if we can continue to be fed enough positive demand news to stimulate the buying after the holiday.

The first bit of positive news came via solid export inspections yesterday. While 11% below the record setting previous week, we still shipped 102.3 million bushels. Of this total 78.4 million bushels or 76.6% were destined for China. In addition to that the USDA reported another sale of 235k MT of beans to China. For the marketing year we have now shipped a record 713.19 million bushels. It is difficult to argue that these number have not been impressive and positive but keep in perspective that the USDA is projecting a new record export number of 1.7 billion bushels and one could maintain that we need this early pace to meet that number. While the known reality is that China has continued to be an active buyer/receiver of beans to this point in the marketing year but with an armada of beans headed in that direction as we speak and meal demand potentially waning, can one really expect that pace of buying to continue?

The 2014 bean harvest is virtually wrapped up as the USDA reports that as of Sunday, we are 97% complete. This would suggest less than 118 million bushels. There are only two states less than 90% complete, which are Kentucky at 87% and North Carolina at 66%.

I suspect that nearby futures should run into stiff overhead in the 10.50/10.60 zone and believe we should see prices exhaust zone after Thanksgiving.

Trade has begun for this holiday shortened week and so far wheat has seen a mixed bag but is trying to remain on the plus side of the ledger. The only item of news that I can see to support the strength, no pun intended, is that the recent return to warmer weather has melted much of the snow cover in the plains states and when the frigid air returns, which is called for later this week, we are exposed to damage. While none of the above is inconceivable, it would seem that we are basically making up excuses to defend the strength. I also read a clip this morning that suggested some of the overnight strength was derived from concerns about the cold temperatures in the FSU and Russia. Commentary I have read from world meteorological companies do not indicate any real threat of winter kill.

Funds remain a net short in the wheat market but have covered a major portion of that position. Nearby futures continue to hold just above key support at the 5.46 level and could remain here for a few days as we move out to the Thanksgiving break but without something a bit more substantial in the news, I suspect we will be turning back lower in December.

Corn

Corn bulls must have been disheartened last Friday when this market gave up the early gains for the close and even more so now overnight as we have remained in negative territory. Other than short-term technical considerations, it appears difficult to justify the bounce we recorded late last week and I suspect shortly after Thanksgiving, we will discover just how much resolve the bull has. Funds are now long around 178k contracts, which for this point in the year would appear to be pretty excessive.

As I am sure you have read the EPA finally made an announcement concerning the ethanol blending mandate and they said, they will not make a decision until 2015. Should any of us really be surprised as this can has already been kicked down the road repeatedly.

We shall see the weekly crop progress released this afternoon but I suspect in traders minds, this harvest is pretty well wrapped up. While there could be a billion bushels or so yet to bring in, I do not believe anyone believes it will not be. We all have that one specific producer that we use as a “marker” for planting or harvest. I traveled past mine over the weekend and much to my surprise his corn was completely harvested.

While we could see nearby futures hold around this 3.60/3.80 range for a few more days, I continue to believe with this general rally into Thanksgiving, we should see prices trend back lower into Christmas.

Soybeans

Beans are under the stiffest pressure overnight but in light of the rally on Friday, we have not really surrendered much real estate just yet. Funds appear to now be long over 50k contracts and I suspect it will become increasingly difficult to defend that position.

The weather outlook in South America continues to look favorable and I understand that Brazil saw widespread coverage of 1” to 3” over the weekend. Safras now estimates that planting nationwide has reached 74% complete.

With over 7 MMT in route already, it would appear that Chinese demand could drop off rather suddenly, particularly if we do not see any weather threats in South America. With the domestic meal situation on the mend, China has been the one factor allowing the bull to stand its ground and if that goes away the reality of the fundamentals to not appear to be very promising.

As with corn and wheat, we could chop around current levels through this holiday shortened week but unless the bull can find something the herald after the holiday, I suspect we are headed lower then into the end of the year.

On December 4th 1804, almost 210 years ago to the day, one of the more famous stories in the history of western civilization took place. It was an event that made clear the egotistical and arrogant personality of the individual at the center, in this case it happened to be Napoleon. It was on that date that he was crowned Emperor of France, and according to the legend, he snatched the crown from the hands of Pope Pius VII and placed it on his own head as a gesture that he would bow to no one else’s authority, not even the church, and could hence forth rule by his own decree. While there was no official ceremony or any crowns involved, on November 20th, 2014 President Emperor Obama snatched the constitutional authority from the hands of Congress, declaring himself the supreme authority, and announced a new law for the land concerning immigration. Realistically, he was not setting a new precedent for his time in office as he has already maintained the White House has the authority to wage war without the consent of Congress and pushed through a healthcare bill predicated on false pretenses and fuzzy math, but he generally did not call for televised events beforehand to declare his supreme authority.

Before going on let me say, by no means is that an endorsement of the inaction of Congress. The immigration policies of the United States are abysmal and a complete overhaul has been needed for decades. Let’s face it, if you can throw a 100 mph fastball, you can be fast tracked into the country as you evidently are under some immanent threat of life in your native land. But if your skills are that of a common laborer or even an electrical engineer with a study visa about to expire, you are probably looking at 5 to 10 years of bureaucratic nightmares and may never gain proper access. Shame on the elected officials who have ignored these problems, and while I know this is an overused slogan, especially in a nation that was built of immigrants.

Regardless, in face of all the problems we grouse about concerning those in Washington, there was a very good reason that our founding fathers divided authority between the executive, legislative and judicial branches of governments. These are the first three articles of the Constitution of the United States and were placed there for the specific purpose safeguarding against the abuse of power of any one of the three. While these wise men may have not envisioned career politicians or the abusive influence of money in politics today, they fully understood the danger of too much power and authority concentrated in too few hands and the danger to freedom that this concentration creates. Ruling by executive power not only undermines this distribution but it could also be argued that it denies the will of the people who elected their representatives.

By no means did this abuse originate with Obama. Our politicians increasingly seem to believe they should take advantage of the system to push their own agenda no matter the cost, damn the Constitution. To them, governing is a net sum game. Regardless of how you feel about immigration or waging war or even healthcare, we as citizens must demand that our elected officials adhere to the most basic foundations of our government.

History remembers Napoleon as one of the great military leaders of 18th and 19th century. Maybe the politicians of today are trying to do monumental things with a belief that history will remember them for bold undertakings and leadership. Of course Napoleon is also associated with people who try and achieve more than their abilities are capable and he died in forced exile in a foreign land. Evidently the immigration policies in 1815 on the island of St. Helena were not as restrictive as the United States.

After three days of losses the wheat market was able to stage a comeback of sorts yesterday with funds estimated to have purchased around 4,000 contracts. Even with the bounce we still posted a lower high and lower low but buyers have pushed us higher again now this morning. We continue to confront the same story with ample world supply and stiff competition from the EU and the Black Sea, which should keep a lid on additional strength. Note that Mario Draghi, president of the European Central Bank stated that the bank is ready to expand the fiscal stimulus program in Europe and this along with an interested rate cut in China has brought buyers back to the US Dollar. While it has not pushed into new highs for the year just yet, we are knocking on the door.

El Nino is back in the news again but it would not appear to be occurring at a time that would present problems in any production areas. Earlier this month the Climate Prediction Center increased the odds of an El Nino to 58% and since that time pacific equatorial waters have continued to warm. If anything, the most immediate impact would be on South America and historically this event produces good rainfall. That would seem to be just what the doctor would order for the next couple months of crop development. If the El Nino persists and grows, there is also some correlation between El Nino’s and good Northern hemisphere crops as well. The danger would be if it continued on into spring and summer and threatened next years monsoons and Australian weather but that is a long ways off at this point.

Next week we “officially” move into holiday trade and I suspect the begging of year-end liquidation. Seeing that the most recent trend has been higher the odds would favor trending back in the other direction.

Corn

With funds leading the way with around 12,000 contracts purchased, the corn market produced a fairly impressive rally yesterday pushing above the previous days high for the first time in five sessions. While it is still early in the Friday session, we have witnessed some upside follow-through but we remain around a nickel lower for the week. Dragging on the corn market this morning is the sharply higher dollar, which technically leaves us at even less of a competitive position in world trade.

That said, part of the strength was stimulated by the better than expected export sales report yesterday. As nice as that was to see, we continue to remain behind the pace of last year and unless we can string several week of number like this past one, also behind the pace we need to reach current projections.

There is also continued rumor that the EPA will release the 2014 mandates for ethanol, which they are supposed to do by the 30th. This theoretically could set the tone for the 2015 mandate but it seems that about every other week the trade changes its mind as to if this will be bullish or bearish. The favored view yesterday was bullish.

December deliveries begin next week as does the holiday season so unless we uncover something fresh, trade will likely be occupied with rolling and evening of positions. As I have commented previously, this would appear to be one of the traditional setups where the bull can have the Thanksgiving turkey with the bear then able to feast on it for Christmas.

Soybeans

Unlike corn, the bean market was not able to poke in a higher high yesterday but overnight and into this morning we have been successful in doing so. Gauging from the dearth amount of news around this morning, particularly positive news, I have to suspect the buying is predominantly technical.

It was reported yesterday that Parana, the second largest bean producing state in Brazil had now reached 85% planted with 87% of the crop rated good or better. I have not seen an official update on Mato Grosso, the largest bean producing state but have heard they are in the 80 to 85% range. I understand the only problem areas currently are in the far northern reaches of the country were it remains dry.

The National Bank of Argentina has announced a new strategy to “encourage” farmers to sell the old crop inventories that they have held onto tightly as inflation eats away at the peso. They will not loan money to any farmer to who is holding last years inventory. Another fine example of a government managed economy and marketplace.

If this rally is nothing more than a technical bounce, we could have one or two more days of buying ahead but we should fall short of the highs posted last week. With the meal issues for the most part in the rearview mirror and the likelihood that China will be slowing down purchases, I find little right now that would sustain this strength through the holidays.

The poor wheat market just cannot seem to find a friend at this point and this after being the toast of the speculative crowd for much of October. As is so often the case, fame is fleeting and once a few wrinkles begin to form suitors begin looking for the next star.

Even though the US is not in a very competitive position on the world stage, export sales were actually a bit better than trade expectations. We managed to sell 361,700 MT or 13.29 million bushels last week. This number was 13% lower than the previous week but even then 1% above the 4-week average. Top purchasers were unknown destinations taking 130.5k MT, the Philippines with 52.3k MT and then Japan with 52.1k MT. Year to date we have now sold 594.6 million bushels which is 26% behind last year. To reach the USDA target of 925 million we will need to average sales of 11.8 million per week moving ahead. These numbers appeared to do little to shore up a soft overnight trade.

There are a number of tenders being worked at this time, the largest being Saudi Arabia seeking 330k MT but I do not believe anyone is expecting the US to snag that one. After three lower closes in a row, it would not be a surprise to see a rebound within the next few days in wheat, particularly with a shortened week just ahead but I would not expect strength to hold. With funds now on the long side of this market and really next to nothing to support their holdings, I expect to see additional liquidation as we move out through the end of the year.

Corn

Even with a positive weekly ethanol report yesterday the corn market could not uncover any support and in fact, the selling appeared to accelerate. I understand fund sold around 10k contracts.

For the week ending November 14 we produced 285,180,000 gallons of ethanol, which should equate to around 102 million bushels of corn. On top of that, stocks of ethanol were down 16 million gallons. The lack of response could be due to the fact that the USDA has already factored in a 5.15 billion bushels corn usage number in the S/D reports and we have done nothing at this point to suggest it would be any higher than that. Additionally, there were rumors floating around again that the EPA may finally announce the guidelines for the blending mandate moving ahead and it is widely expected the number will be reduced.

Exports sales were a pleasant surprise as we sold 908,700 MT or 35.8 million bushels last week. This figure was 80% over the previous week and up 45% from the 4-week average. The top purchasers were Japan at 447.5 MT, Mexico with 159.6k MT and Peru taking 149.4k MT. Year to date we have now sold 812.3 million bushels which is almost 14% behind last year. To reach the USDA target of 1.75 billion bushels we will need to average 22.9 million per week for the next 41 weeks. The number appeared to help shore up the overnight bounce but I suspect the strength was more related to a little short-covering after four lower closes in a row.

On a FOB basis, US corn remains a bit “spendy” as my Norwegian mother would say and you would need to search far and wide to find any other positive news. With holidays fast approaching and little reason to bring in new business, I have to believe that corn will remain in a defensive posture well into December.

Soybeans

Yesterday the USDA announced another good sale of beans but the market continued to slide into lower ground. Have we reached the point that the market recognizes that even with short-term business, the longer-term supply situation is more than abundant? Prices have bounced a bit overnight and into this morning but I suspect that is more a reflection of profit taking after an 80 cent break in the last five sessions that any new buying interest.

Export sales for beans themselves did not provide much to cheer about. For the week we sold 483,000 MT or 17.7 million bushels. This set a marketing year low and was down 55% from a week ago and 68% from the 4-week average. Top purchasers was China with 532.9k MT followed up by Spain with 131.5k MT but as you can deduce there were cancellations with decreases reported for unknown destinations of 657.6k MT. While one week does not a trend make, it has been widely expected that we would begin to see this and ultimately a number of the sales on the books will be shifted to South America. On a more positive note, meal sales were much better than expected at 265.7k MT but these have been erratic at best recently and did not appear to have scared too many shorts.

The weather outlook for Brazil and Argentina looks favorable so other than temporary short-covering, it is difficult to imagine what will bring buying back into this market for now.

While the selling by no means looks intense or aggressive, the wheat market sagged lower again yesterday and has overnight as well. We have not seen December futures slip back to the pivotal level between 5.42/5.45 and we appear poised to tip over this edge if we do not find a piece of fresh positive news quite soon.

I have read additional stories out of Brazil concerning the very poor quality and yields of the wheat crop this year. With harvest now reported 75% complete in the state of Rio Grande do Sul, they have reported losses in production of anywhere to 30 to 60% and nearly none of the quality acceptable for human consumption. This could ultimately provide a boost for US export trade but we are not looking at anything that changes supply numbers dramatically.

This is especially true since it was confirmed yesterday that a load of French wheat has been booked into the Eastern US for the feed market. Needless to say this is a rare occurrence but with the strong dollar and the off quality with French wheat this year it was economically viable. This is of course not a positive for US wheat nor feed grains.

As we are all too aware, markets will always overshoot on swings and it would appear that with the information at hand, wheat has done this to the upside on the advance. There is always that risk that we unearth a surprise positive story but until that comes, it would appear we have lower ground to revisit.

Corn

You would have to search hard right now to find a positive story about the corn market. Harvest in the US should be pretty well wrapped up by December 1st and any way you cut it, we still have a record production and the potential to finish the year with in excess of 2 billion bushels for the first time in a decade.

As we outlined yesterday, the export pace has been less than stellar at this point so it is difficult to try and build a case that export demand will be improving over and above the current projections and in fact may already be optimistic. We now have ethanol prices on top of RBOB and while the ethanol producers still have positive margins, blenders do not and could begin using RINs to cut back the blend until the economics improve. While I am not sure if it will be reflected on the report later this morning, we need to keep a close eye on the ethanol inventories to see if they begin to build. Last but not least, we have confirmation that the first cargo of French feed quality wheat has been booked into the east coast for the first time in over a decade. Keep in perspective as well that this was not because of availability issues here, it is purely economic and if one has been booked, what is to say that there will not be more. I have already felt that the USDA was using a very optimistic number for feed usage on the corn supply/demand tables and this just reinforces that idea.

Corn has now closed lower for three days in a row and with the overnight pressure we could be in line for the fourth. We do not really confirm a top and reversal until we have pressed down through the 3.59 mark in December futures but I see little in the news at this point to keep that from happening.

Soybeans

Even with an announcement of a sale of 3.7 MMT of beans to unknown destinations yesterday the bean market could not sustain strength. While a single days action will not often expose what is happening in a market, this would seem to suggest that we have a weary bull.

It would appear the feed market issues are behind us and the pipeline for meal is rebuilding and both crushers and exporters have ample inventories for the time as well. South American beans and meal are competitively priced versus the US and China, the 800-pound gorilla in the bean market already has a massive flotilla of product headed its way. The week that we do not see China as a massive buyer in the export sales could be when the bulls panic. I suspect that unless we begin to see weather issues in South America, we have already witnessed the pinnacle in bean demand for this year.

The breakdown in prices yesterday just unraveled the Monday rally but the pressure we have now see overnight is pushing us into lower lows for the week. Indicators are pointed lower so lacking a surprise piece of positive news, it would appear this market is headed lower at least into early December and possibly right through the balance of the year.

Neither the cold snap we are experiencing or the ongoing tensions with Russia and Ukraine could do much to help the wheat market yesterday as we saw futures reverse the gains that were posted last Friday. We have continued under pressure overnight and while we remain above the late October high in December futures, it would appear that we have a market that has grown weary of trading the existing news.

Export inspections certainly did not help shore up the confidence of the bulls as we loaded only 5.1 million bushels. Granted the bean loadings were hogging all the port capacity but this number was 6 million bushels below last week and a full 10 million bushels below the 10-week average. Year to date we have now moved 419.46 million bushels compared with almost 631 million the prior year. To reach the USDA target of 925 million bushels we will need to average 18.1 million per week moving ahead, which is not impossible but with the less than competitive position of US wheat and the recent trend in exports, it is beginning to look improbable.

We found nothing supportive on the afternoon crop updates either. Winter wheat planting stands at 95% complete, which is just 2% behind average. The state that is furthest behind average is California with 55% planted vs. the average of 62%. Emergence is up to 87% compared with a normal 84% and the rating remained unchanged once again with 60% of the crop rated good/excellent.

While I am not looking for the wheat market to collapse, unless we can unearth something fresh to provide the bulls a reason to invite a few more friends to the feed bunk or even remain in the lot, it would appear we have little reason to hold the October gains. A close back below the 5.42/5.40 level should confirm a reaction high and open the door for softer action through the end of the year.

Corn

The corn market could not find anything positive to throw into the mix yesterday either and closed lower for a second day in a row. We continue to hold the recent uptrend but are teetering on the edge of it and unless someone throws a supportive rope over for them to hold on to, they could slip over the edge soon.

That rope certainly did not come via the export inspections as we posted the lowest shipments for the marketing year. For the week ending November 13th we shipped 15.8 million bushels, down 5 million from last week and a full 13 million below the 10-week average. For the marketing year to date we have now shipped 306.38 million bushels which is an average of 27.9 million per week. To reach the USDA target of 1.75 billion we now need to see this pace pick up to 35.2 million per week. As I have commented previously, the current USDA figures for corn usage appear to be quite optimistic. If correct, even if we have seen the high side of the supply estimates, a slackening demand would not be good for price recovery throughout the year. Note as well that spot ethanol margins have moved into the negative column and Brazilian ethanol is at a discount to US.

The harvest number came in pretty well in line with expectations as we have completed 89% of the corn, which is 1% ahead of the 5-year average. There are still three states below the 80% mark which are Michigan at 59% vs. the normal 75%, Pennsylvania at 79% but that is close to their normal 81% and Wisconsin who stands at 64% compared with and average 78%. The corn harvest story is pretty much complete.

Maybe the weekly ethanol report on Wednesday will provide the bulls with a little shot of adrenaline but I suspect that would be temporary at best particularly in lieu of the negative margins. Outside of that, you really have to stretch to find much positive to say about the corn market, particularly after a 20% rally over the past 6 weeks. I continue to believe we have set the stage for a swing lower into Christmas and the end of the year.

Soybeans

The beans bulls were provided with two shots of steroids yesterday and while each helped bulk them up a bit and enabled them to score a couple more runs, we are still in the early stages of the game and the opposing team still has a lot of talent.

The first stimulus yesterday came via the export inspections, which were a record 114.4 million bushels. This compares with the 10-week average of 57.7 million and the marketing year to date number of 55.5 million. I do not suspect that anyone would be surprised when I say that 89.3 million bushels or 78% of these were destined for China. Regardless, this does bring year to date shipments up to 610.29 million bushels, which is just over 17% ahead of the same pace last year. To reach the current USDA target of 1.7 billion bushels we will need to average 26.6 million bushels per week. While at first glance at the average to date you might say that would appear easy but, with 41 weeks left in the marketing year unless there is an issue with South American production that may be a bigger challenge than you might suspect. We should begin to see the numbers trail off now in the weeks ahead.

While the export numbers provided a turn around in the market yesterday it was not enough to sustain strength but then the October crush report was released which was enough to turn prices higher for the rest of the day. For the month of October the industry responded to the strong margins and of course finally availability of raw product and we crushed an October record 157.1 million bushels. This of course helped make up for the light September figures. While probably not at this kind of pace we should see solid crush numbers for at least another month or two as we refill pipelines.

Just for good measure, the USDA did announce a sale of 111k MT of beans to China.

As expected, the weekly progress reported shows that the 2014 harvest is just about wrapped up. Nationwide we have harvested 94% of the crop, which is 2% behind average. The state furthest off pace right now is Kentucky at 75% complete vs. the normal 90%. Harvest in North Carolina is 53% complete but that is actually 3% ahead of the 5-year average.

While not a market mover there was an interesting story I read overnight out of South America reporting that 200 trucks carrying around 6,000 tonnes of beans were apprehended smuggling them across the Argentina border into Brazil. Evidently this has not been uncommon as they try to avoid paying the aggressive export taxes imposed by the Argentine government.

While the exports and crush news were enough to provide a higher close for the bean market yesterday, unless we can continue to uncover stories like this each day, I suspect it will be a challenge for this market to sustain current levels let alone push any higher. We have witnessed two-sided action overnight and I would like to see additional strength yet this week but if correct intend to view it as a selling opportunity. As I have commented previously, this appears to be the classic case of the bulls enjoying the turkey for Thanksgiving.

An early morning travel schedule necessitates a shorter than normal morning comment but as it looks, there is very little news around concerning the grain and soy markets early today anyway.

We have witnessed two-sided action across all these markets during the overnight hours but any strength that was there has faded as the session wore on. Both corn and wheat continue to trade within striking distance of the highs posted last week but the reversal lower Friday on beans would have appeared to have broken the spirit of the bull.

Snow fell across a wide swath of the upper Midwest over the weekend with most quantities fairly limited. While that will provide a nuisance for the balance of the harvest, we should see the bean harvest reach the 95% status on the reports later today and corn between 85 and 90%. Realistically for the market, harvest is pretty well wrapped up.

The situation in Ukraine does not appear to be improving. President Putin was receiving so much criticism at the G20 meeting in Australia that he elected to leave early. This situation will continue to keep the wheat market on pins and needles and the uncertainty of it all should remain a supportive factor for now.

The weather picture is South American looks generally favorable for continued advances in the planting process and some locales are beginning to make solid headway. In the state of Mato Grosso it is reported that the planting progress has reached the 84% complete which would be just 9% behind average.

Corn, beans and wheat have all now recorded between 20 and 22% rallies from their respective lows over the past 6 weeks, which of course is quite respectable considering the time of year and the overall fundamental situation. I continue to believe the corn and wheat markets have major lows in place but the jury is still out for beans. Regardless, this advance has left all three in overbought positions and unless we can find something to feed the bullish element each week, I believe the trend between now and the end of the year should be lower.

Its seems now but a distant memory, but four short years ago there was a country who’s financial situation was so dire that it was threatening to undermine the entire European Union; Greece. The very country that gave us the teachings of Socrates, Plato and Aristotle on which much of western philosophy was based, not to mention the stories and myths that have provided us with archetypes to define society and citizenship, was reduced to begging the EU for a bailout. Years of easy access to money borrowed against the credit worthiness of the stronger member nations had allowed the one time beacon of the west to become so indebted and bloated internally with social programs that they could no longer service the interest on the debt, let alone the principal. While grouped in with the several other nations and given the synonym “PIIGS”, (Portugal, Italy, Ireland, Greece and Spain), Greece stood out not only for the enormity of its debt ratio but also due to the fact that there were apparently few avenues to generate new revenue, particularly when the sour world economy had cut deeply into their tourism. There was much gnashing of teeth throughout the halls of the European Union as they tried to put together a bailout plan(s), and especially contentious debates in Germany, who would most likely have to shoulder the largest risk in doing so. The frugal German citizens were none too thrilled about this prospect even through Greece had turned into a major destination for Porches, BMW’s and Mercedes. Ultimately a €230 billion bailout was put together with some very extreme austerity measures required; keep in perspective that amount is roughly the size of the Greek GDP.

Fast-forward to November 2014 and we discover that after a total of six years of recession, the Greek economy has finally climbed out of recession. Economists now believe the recession in Greece was over in the second quarter as output grew by .4%, but that was followed up with .7% expansion in the three months leading into the end of September, which was a full 1.7% above the same period the year prior. Even more stunning, this nation was the leading economic performer in all of the Eurozone for the period. Even the stalwart of the union, Germany, could only muster growth of .1% in the third quarter.

Now there are those that would suggest that this success story means that all we need to do is throw enough money at a problem and we can make it go away. Yes, as I commented above there were some very stringent and needed austerity measures that were implemented as they tried to keep the government from defaulting on debt which could have touched off another bank panic had that happened, but I suspect you would be hard pressed to find many citizens of that country who really feel their situation has improved significantly. The overall economy is 30% smaller than is was six years ago, the unemployment rate stands at 25.9% and over 25% of the citizens live at or below the poverty line. It would be a steep task to convince these people that their prospects are looking up.

Now, it would not be reasonable to compare the Greek economy with that of the United States, Japan or many nations in Europe, but we all share one similarity—rising or extreme levels of debt in relation to GDP, which in turn chokes off or stunts economic growth. The premise is simple as, no matter if it is a government or a business, the more money that is required to service debt the less there is for growth and expansion. You may move forward, i.e., positive GDP, but it severely stunted from what is should be. According to John Maynard Keynes, this is what defines a depression. It is not negative GDP for consecutive quarters, that is a recession. A depression is when the expansion in the economy grows at rates less than it is capable of doing. The United States should have the capacity to see the economy grow 4 to 4.5% annually and we are running maybe 3% for the year so far, which would technically say that our growth is “depressed” by 1 to 1 ½%. By this definition, Japan has been in a depression for 20 or better years.

It by no means has to be this way for our country. We still have the natural resources and entrepreneurial spirit to create expansion and new wealth in this economy and lessen or eliminate our dependence on others for critical things like energy. That said, unless we reverse the elected officials addiction to spend more than we generate and always point the finger at the other for the blame, we will continue to march towards the same fate as these other nations. One of the first orders of business after the election was to pass a bill for a pipeline that we do not need that and will bring in additional foreign oil. I find it telling as to the real priorities for reform in Washington. This brings to mind another great thinker from ancient Greece, Sophocles. While not known for his philosophical theories about life or ethics or economics, he is regarded as one of the writers who brought us a special kind of theater: the tragedy.

This has surprisingly turned out to be an active and large volume week in the grain and soy complex and we have seen corn, wheat, beans and meal all pressing into higher highs for the rebound. As I commented earlier this week, the market has the feel of an orchestral piece that has been building and building into a crescendo, which often leads to the end of the performance. While the premise for these moves originated with fundamental rationale, the most recent activity has been technical/fund buying inspired and those factors that originally lifted us higher have larger been corrected. I am not sure if we can sustain the strength for another week but it would appear that we have the classic case where the bull gets to eat the Turkey for Thanksgiving, which can then mean the bear will feast on it for Christmas.

Wheat

The wheat market did receive an extra boost from stories yesterday that Russia was amassing additional troops along the Ukraine border and according to Ukraine across the border, which of course Russia denies. It is interesting to note that this is occurring while President Putin is meeting with the other G20 members in Australia. If you recall, the riots that began in Ukraine this year erupted during the winter Olympics in Sochi leaving Putin in a position where he could do nothing and it would almost appear that this latest maneuver during the G20 summit is his way of thumbing his nose back at the west. Regardless. It has unsettled the wheat market but considering this is about the 5th or 6th time this has happened since February, I do not suspect we will get much traction.

Exports sales did rebound from the prior weeks’ terrible numbers but basically has just returned to the average pace thus far. For the week ending November 6th we sold 417,700 MT or 15.3 million bushels. This number was 57% higher than last week but still above 5% below the 10-week average. The top purchasers were South Korea with 60.3k MT, the Dominican Republic taking 49k MT and unknown destinations buying 46.7k MT.

Even with the overnight pressure December wheat is holding above the October reaction high of 5.45 ½. If we can sustain above this level into the close, it should keep the door open for possible gains again next week but keep in perspective that resistance will be dense from here up to 5.80 and the further we press higher at this point, the less competitive we become in the world market unless the dollar crashes which it most certainly is not doing today.

Corn

We witnessed a solid push into higher highs again yesterday and this time we did a much better job of holding the gains for the close. Once again, it would appear that the buying was fund/technical inspired and the disconnect between cash/fundamentals and technical activity grows ever wider. This is a normal occurrence in markets but can only exist temporarily.

The weekly ethanol production number fell in line with expectations yesterday and remains solid. We produced 278,124,000 gallons for the week, which should be just over 100 million bushels of corn. The only note of possible concern was the 23 million gallon build in inventories.

Export sales were right at expectations but not surprising, uninspiring. For the week we sold 505,400 MT of corn or 19.9 million bushels. This number was 6% higher than the previous week but 49% lower than the 4-week average and 36% below the 10-week average. The top purchasers were Japan at 189.3k MT, Mexico for 88.3k MT and Saudi Arabia taking 71.5k MT. Year to date we have now sold 776.6 million bushels which is almost 15% behind that pace a year ago at this time.

Corn has struggled a bit overnight and into this morning but has really surrendered little of yesterday’s gains at this point. If that remains the case through the close, it should leave us with a positive technical bias again into next week. Note that on the spot continuation chart we have pushed to within a penny of closing a gap at 3.90 that was left when the July contract expired. We may be able to stretch this rally out towards Thanksgiving but I believe once the spec buying has exhausted, so has this market.

Soybeans

The bean market appeared to take a back seat to the corn and wheat trade and prices are struggling here this morning. November futures do expire today but note that after all the excitement and push into higher highs for the swing that was witnessed this week, January futures are currently trading lower for the week. For those that want to keep track for the close today, this contract finished at 10.38 ¾ last Friday.

For all intents and purposes the nearby supply issues with meal have been rectified at this point and as I have commented previously, this explosion could come back and haunt prices longer term as we may now be faced with a near-term oversupply. This is not to say that a weather hiccup that would adversely effect the already late planting South American crop could bring in a resurgence of new buying but outside of that, I see little that would be considered supportive. On the world market, US beans and products are not competitive.

It is tough to call export sales in excess of 1 MMT disappointing but note, this was the third week in a row of declining numbers and actually fell in below the trade estimates. For the week we peddled 1.074 MMT or 39.5 million bushels. This number was 33% below last week, 28% under the 4-week average and 23% below the 10-week average. Now I recognize this is going to shock everyone but 72% or 773k MT of the sales were to China followed by Mexico taking 110k MT and Thailand with 85.6k MT. At least meal sales were not negative this week but they were 67% below the 10-week average.

This market is looking and acting very much like a tired bull and without fresh feed again next week, I do not believe it can hold up under it own weight.

The action in the grain and soybean markets at mid-week appeared to have built into a crescendo as we exploded into higher highs for the advance in corn and beans and clicked a tick through the previous high in the wheat market. The volume of trade was large, particularly in the corn market, which can often be indicative of a final push to a high with this kind of advance. Grains were able to hold on for a higher close although not above the previous highs but that was not to be the case for beans and meal, which have been the driving force as of late. Did that spell the end of this move? While it would be premature to make that claim just yet, we appear to have a number of warning bells clanging.

Wheat

Part of the strength witnessed in the wheat market on Wednesday was stimulated by concerns of the frigid temperatures that have descended on the upper Midwest and Plains states conjuring up thoughts of winter kill. As with any year where cold temps arrive before snow cover that is a risk but the extended forecasts have not called for prolonged abnormally cold weather. As with the concerns about the cold weather in Russia and Eastern Europe a week ago, I suspect it will be difficult to sustain strength for an extended period on that news.

Beyond this, we are still confronted with the same issues in that we have adequate domestic and world supplies and US wheat remains priced above our competitors. Add to this we shall soon be into holiday trade and funds have already covered a very large piece of their short position over the past month and it would appear it should be difficult to attract new buying interest. While it is entirely possible that we can dribble just enough positive news into the market each day to keep the bears off balance we have already pressed against what should be a very tough level of resistance at 5.45 in nearby futures and the sledding is all uphill from here. As I have commented previously, I am not bearish on the wheat market and believe we should have a low in place but suspect we are pressing against the upper range for this initial rally.

Corn

Big volume up day for corn on Wednesday as we pressed December futures up through the August reaction high of 3.81 for a brief period in the morning but could not sustain prices above that level for the closing bell. While we did close higher and prices have tried to rebound again during the overnight hours, it is still questionable if we can hold above that previous high water mark.

Funds have been the major buy side driver on the rally over the past thirty days and on Wednesday alone were estimated to have purchased in excess of 24,000 contracts. Managed money should be sitting on the largest long position since mid to late summer and while this does not rival historical holdings, it should not as we are confronted with the largest projected ending inventory in a decade. Also keep in perspective that we have witnessed an exodus of investment/fund money from commodities in general, so their overall positions should not challenge those of 3 to 5 years ago.

We shall see the weekly ethanol stats released on Thursday morning which should be solid once again and then exports sales on Friday morning and in light of the fact that US corn is not competitive on the world stage, I suspect that number will provide little in the way of support. The current cold blast is being perceived as a positive as well but the 8 to 14 day outlook does show temperatures moderating. As with wheat, I believe we have the extreme lows behind us but should soon be running out of fuel to keep the locomotive moving forward.

Soybeans

As I discussed yesterday morning part of the job of the market place is to provide the economic incentive to increase and/or decrease supply to meet demand and of late that has entailed a rising meal and bean price to satisfy the depleted pipeline of the end user. We by no means have a lack of total supply but they have not been where the need was and the market advance was seeking an economic level to correct that. I pointed out South American meal was trading at a discount of $50 to $60 a ton domestic and that economically it appeared feasible for imports and during the session yesterday a story began to circulating that meal had been booked for delivery into North Carolina which was all that was required to make the buyers scatter like rats off of a sinking ship. While I have yet to hear an actual confirmation this happened it matters little as with the current spread, it will.

The larger issue is that through the successful economic remedy that is healing the sick patient today, we could be sowing the seeds of a greater illness. We do not need additional inventory of meal in this country. A few weeks back I wrote about the woeful lack of investment we have seen in this country in our infrastructure, which in turn will potentially bite us in the rear and this would appear to be just such an instance. Once we have moved beyond this current problem, unless weather takes a serious turn for the worse in South America, there would appear to be little to hold prices together.

The market action yesterday was really all about the beans. One could make the case that the numbers on the wheat report actually leaned to the friendly side, which would be correct but seeing that we have already posted more than a 15% rally from the lows in October, I suspect most of the buying power had been spent ahead of time. Prices have extended nicely overnight but nearby futures still remain over a dime below the highs that were posted at the end of last month.

Looking around the news this morning, I can find little outside of a slightly softer dollar that supports the action. The excessively cold weather concerns for Russia and Eastern Europe appear to have subsided at least for now nor are there any burning concerns over the US winter crop.

As I have stated a number of times, I do believe we have our extreme low in place for this market but the world market remains very competitive and the US sits at a premium to the Black Sea and Europe. There will always be a certain amount of demand that works here due to logistics but for now the lions share will go elsewhere. As such, I continue to believe we should be looking at a sideways pattern at least through the end of the year.

Corn

You could actually make a stronger case for a corn rally yesterday than for wheat as the largest surprise on the November report was in the corn number but here as well, I suspect this market is just riding on the coattails of the beans as they continue to dance at the bull ball. Yes, I do believe we have a major low already established but to advance more than the 20% already accomplished leading up to the report would seem optimistic for now.

With the harvest pace now up to normal at 80% there would appear to be little story outside of those across the Dakotas, Minnesota and Wisconsin that received a pre-mature blanket of snow yesterday. North Dakota has 27% of the corn still out, South Dakota 16%, Minnesota 10% and Wisconsin 50%.

CONAB released updated estimates for the 2014/15 Brazilian crop yesterday but considering how early we are the changes were slight. They estimate corn production to be between 77.3 and 78.9 MMT which would be a reduction of 1.2 to 3.2% than a year ago but a slight increase from the estimate last month. On the USDA report this week WASDE has this crop estimated at 75 MMT.

Weekly ethanol numbers will be released later today but export sales will not be released until Friday morning due to the Veterans Day holiday. It would appear that we could have December corn stuck in this 3.80/3.70 zone for a bit longer but to extend through the upper end of that zone, I suspect we would need a fresh batch of bullish feed.

Soybeans

Beans and meal continue to be the leaders of the bull pack as we pressed into higher highs for the swing once again yesterday. I for one underestimated the power of the short-term impact that the tight meal inventories would have on prices and we have now completely reversed the position of the funds from a net short to a net long but this was accomplished via short covering not new buying and open interest has continued to move backwards. Not the kind of setup normally associated with extended bull moves.

While this is a futures market and as such is always looking for the what-if risk scenario, it would appear that we are developing a premium for a scenario that is factoring in continued tightness in domestic meal as well as a never-ending demand from China. It would seem though that we have a disconnect between a short-term logistical supply problem and the longer-term excess supply of beans we have in the world. Of course part of the function of the market is to move enough to rectify the imbalance but ultimately the medicine and the cure can create ill side effects down the road.

It would appear that at least from an economic standpoint we have accomplished the first. The domestic rally in meal has not only provided incentive to move product by any means domestically, we have now pushed US values $50 to $60 a ton above South America. While we still have to go through the physical process of refilling pipelines, there are reasons that it will be done. The longer term implications are that we have pushed prices enough that feed users will be looking at substitutes which should begin to trim demand and possibly even more critical is the fact that over the past month we have pushed 2015 beans higher against 2015 corn, providing additional incentive to plant more beans. With a 450 million bushel domestic carry out and 90 MMT World carryout, do we really need more bean acres? It would appear that this animal could ultimately have a really long tail.

Of course when psychology shifts, those in control will grasp any pieces of news that can bolster the cause and that seemed to be the case with beans yesterday. Yes it true that CONAB reduced their estimate for the 2014/15 beans crop to an estimated range of 89.34 to 91.74 MMT but this was basically down .5 MMT. Now even at the upper estimate this would be little over 2 MMT under the last USDA estimate but also keep in perspective that it would still be between 2.50 and 6 MMT above last year’s crop, which in itself was a record.

With the higher overnight action it would appear the buying is not yet exhausted. I suspect we could extend higher yet into next week with nearby futures testing out the 11.00 mark again but it would appear that without something new from left field, it should just be a matter of time before the long-term picture will overcome the short-term questions.

We have another monthly production report in the history books and as with almost all reports there were a few twists and tweaks but in this case, none that were overtly shocking. The domestic wheat number was a mildly positive surprise but the lack of positive price response was a reminder that neither domestically nor world wide, do we have any issue with supply.

The trade was expecting to see an increase in the domestic carryout between 3 and 6 million bushels while in turn, the number was reduced 10 million. Now, had that been accomplished through some type of increase in usage it may have been deemed friendlier, but the change came about via a 1/10th per bushel cut in yield and the likelihood of additional production cuts are extremely thin. This means that any additional cuts in ending stocks would have to come via increased usage and with US prices still a premium to major competitors, that could be a tough sell literally and figuratively.

Domestic stocks are by no means burdensome but when you weigh this against the ample world stocks it matters little. The USDA increased world ending stocks an insignificant .31 MMT and this after taking production down 1.26 MMT. This was accomplished through drop in the US production as well as 1 MMT cut for Australia. Note that Russia was left unchanged at 59 MMT. I did read a story overnight that tells us that the latest victim of wet weather in front of harvest resulting in a poor quality crop is Argentina. Regardless, even a million or two cut in the world carryout would not create major issue as we are currently projected to have the largest ending stocks in 3 years and a more than comfortable supply at that.

Probably the best thing about the report for wheat is the fact that we should have confirmed a known supply and I believe should have provided confirmation that we have a low in place. The biggest challenge moving forward will be if we can develop enough demand to sustain much more strength to the upside than we have already witnessed.

Corn

If there was anything that would be considered a legitimate surprise yesterday it was in the corn, as the USDA trimmed the yield 8/10th of a bushel instead of increasing it a like amount as the trade was expecting. It would appear those low test weights that have been reported in the northern end of the corn belt were pretty widespread. While the market did respond with a bounce immediately after the number was released, we did not even reach back to the late October highs and then softened from there. While prices did not collapse for a lower close the overall reaction was pretty uninspired. It could be that we just have tired market after the recent advance but I suspect it could be something a bit deeper than that.

First; any way you try to spin it this is still a record yield and record production for corn and even after the cut and a slight boost in usage, we are looking at a carryout north of 2 billion bushels. Second; the usage estimate. The USDA did trim food/seed usage 20 million, left feed and exports unchanged and boosted ethanol 25 million for a net increase in usage of 5 million. It is hard to argue with the ethanol category with the grind we have seen to date but I believe both the feed and particularly the export categories are quite optimistic particularly in light of the less than competitive US values right now. Third; world ending stocks were bumped up almost 1 MMT and at 191.5 MMT sitting at a record raw number and the highest stocks to usage ratio since the 2001/02-crop year. Finally, with the amount of carry that remains in the corn market after the recent rally, I believe the market has already shown us a large portion of the range into next year, as $4 futures next summer is a solid premium over current values.

It would be unlikely that the USDA will make any significant adjustments on the January yield and as with wheat, I believe the report should have provided another confirmation that we have established a low and what should be the low trading parameter in corn for years ahead. That said, by also confirming the very ample supplies and optimistic usage, it may have also confirmed the upper limits of the market for the foreseeable future.

Soybeans

The November report confirmed pretty much what the trade was expecting for beans as the yield was bumped up .4 b/p/a for an increase of 31 million bushels in production but all of this was chewed up in a like quantity increase in usage. It is interesting to note that right at the release time we witnessed a poked into higher highs and it would appear that someone may have jumped the gun with the buy trigger and those positions quickly turned into losing propositions after the numbers we disseminated.

Even though there were no unexpected changes in the figures and domestic ending stocks were left unchanged, I believe it should be difficult defend the current values in light of the report. Granted, from a usage side one cannot argue with the increases in crush and exports particularly with the huge sales and inspections we have seen so far this year. We did ship another 91.2 million bushels last week. That said, with basically 80% of this business to China, it would seem that we literally have all of our eggs in one basket. Even beyond that we have a very comfortable 450 million bushel projected carryout, which is the largest number either in raw bushels or as a stocks to usage ratio since 2006/07.

Part of the picture is of course predicated on South American producing a decent crop this year and while Brazil has gotten off to a slow start, the conditions have been excellent to this point. On the world numbers, production was boosted .86 MMT which reflects the increase for the US and ending stocks were decreased .19 MMT. At first blush, you might say that a lower ending stock figure is positive but when you consider the enormity of that number, I do not believe that is realistic. If correct, this will be the largest total number on record by 18.56 MMT and the largest stocks to usage ratio by over 3% at 31.59%.

Without a weather issue in South America I do not see how you can build a positive longer-term picture for beans with these numbers. Add into that, after speaking with a number of people around the country I would not be surprised to see that US bean yield number boosted again on the final number in January and with the current bean/corn ratio for 2015 many believe we could see an increase of 2 million acres in beans. It would appear that the work of the bulls in the months ahead will not be unlike the task of Sisyphus trying to push that boulder up the hill again and again.

As you might suspect there is really only one thing that will ultimately matter for the trade today and that is the November crop production report. We do have a mixed bag of action in the overnight trade as corn and wheat are under minor pressure while beans and products are higher. Macros should be a little positive as we have the energies and the metals a touch higher while the dollar is soft but after the recent swings, these markets are entitled to some correction. As I outlined in the weekly newsletter, I believe we should be seeing commodities as a whole nearing the bottom of this major down swing and for many should be establishing what should be the low end of trade for years to come. This is not to say we will not revisit this area from time to time but rather it should provide an area of value much like 2.00 corn, 2.40 wheat and 4.50 beans did between 1975 and 2005.

That said, the markets that I continue to grapple the most with are the ones that are the strongest here this morning, that being the bean complex. While I do believe beans are in the process of discovering it’s new base, unless the current supply situation and the potential to increase production next year is grossly overstated, it is difficult to come to grasp with the idea that we have a low in place just yet. The reports today should bring us closer to finding an answer to that question. Gauging from the action last week and again overnight, it would appear to me that there are some willing to bet the numbers are contracting not expanding.

While there is some variance between the surveys released, the average guesses for the report are right at;

Corn yield, 175 b/p/a with a range of 171.5 to 178. Corn production of 14.528 billion with a range of 14.242 to 14.722. Domestic carryout 2.132 billion with a range of 1.85 to 2.328.

Soybean yield, 47.5 b/p/a with a range of 46.8 to 48. Soybean production of 3.958 billion with a range of 3.903 to 4.007. Domestic bean carryout 441 million bushels with a range of 403 to 513.

While I am generally never one for a lack of words but I have this secret fear that some morning try as I may, will be unable to actually find anything or at least anything new and noteworthy to say about the markets. It would seem that we are very close to that situation today with the wheat market. Futures are under pressure once again this morning and so far this week we have closed lower each day with the exception for Monday. In fact, if we close lower again today we will have been down 6 out of the past 7 sessions.

Concerns about the abnormally cold temperatures in Russia and Eastern Europe have faded from traders collective memories but what has not is the fact the U.S. wheat is just not competitive on the world stage right now. We were reminded of that on the export sales figures yesterday. A portion of this of course has been due to the continuing escalation in the U.S. Dollar index, which reached to the highest level witnessed since the last significant high in June 2010. Consider that just in the past year the Canadian Dollar has lost 10% against the U.S. Dollar, the Australian Dollar 12%, the Euro between 11 and 12% and now the Russia Ruble over 30%. It does not take long to determine why we are the supplier of last resort.

I would not expect to see much interest in new positions in wheat today and considering the rally witnessed over the past month, if there are any needing to liquidate and step aside, I imagine it will be the long. The average trade estimate for domestic ending stock on Monday is between 657 and 660 million bushels.

Corn

The trade is looking quite uninspired in the corn market this morning as we countdown the hours until the November crop production report. Prices were able to hang on for a fractionally higher close yesterday but we have surrendered that and then some this morning so far. Just gauging from the position of the indicators I use, this market looks very weary and top heavy and unless Uncle Sam can provide a shot of positive adrenaline next week, I suspect it will be a real challenge to hold these prices.

Yesterday the Wall Street journal released their survey, of which was are a part of and came up with an average yield of 175 b/p/a. This would be 8/10th of a bushel higher than last month. I suspect that many are not looking for much of a change due to the fact that supposedly 80% of the test plots they use had been harvested when they collected data for the October report. I still have a hard time choking that down as only 12% of the nations’ corn had been harvested at that time. Regardless this survey came up with a production figure of 14.528 billion, which would be up 53 million from October.

Considering that the trade is expecting higher numbers, even though the changes are not overly significant, there is the possibility that the government could provide a positive surprise next week but I do not imagine even that could be significant either. As always, once the dust settles a bit, the real number to watch will be the ending stocks category and if that continues to climb, it will be a drag on any real price recovery. The average estimate from this last survey is looking for the carryout to climb 51 million bushels to 2.132 billion. Keep in perspective as well, this would be with some pretty optimistic usage numbers already factored in.

Soybeans

Beans and meal led the advance yesterday stimulated by the solid export sales in beans and strong domestic basis levels for meal. I already commented yesterday that without China these bean sales numbers would be zilch and even with them, we are basically running in line with meeting the USDA target of 1.7 billion bushels which would set a new record. Keep in mind in the meal that while domestic prices have climbed, basis levels in South America have been diving lower. It is economically viable again to bring meal into the eastern US.

Outside of the slower than normal planting pace, there is nothing alarming coming out of Brazil. Rains are forecast to continue well into next week. Celeres released updated forecasts for the 2014/15 crop, which did not require much updating as they remained unchanged at 91.35 MMT. The USDA actually has Brazil pegged at 94 MMT for the coming year.

The Wall Street Journal survey came up with an average yield estimate of 47.5 b/p/a and production of 3.958 billion. This compares with the October report estimates of 47.1 and 3.927 billion. The average estimate for ending stock is 441 million, which would be 9 million lower than October. While I am not sure if it is just piling on or trying to out yield guess the next guy but it is interesting to note that I have seen several comments recently about an average beans yield of 50 or above. As incredible as that may sound, this is coming from sources with boots on the ground, so maybe should not be taken lightly.

All that said, we have nearby beans holding above the 10.00 level and indicators that look very top heavy. I suspect we are going to need something pretty positive to hold these levels after Monday.

The generally dour action in commodities and the rising dollar were at least two of the factors conspiring to push wheat lower yesterday but even with a little softness in the dollar this morning, we have continue lower. The wheat market can probably be best summed up with two words right now; not competitive. The world’s largest importer of wheat, Egypt purchased another 235k MT yesterday comprised of French and Ukraine wheat. At the FOB level U.S. wheat stands anywhere from $10 to $20 a tonne above the others. This is not a good position when world supplies are adequate to abundant.

We will of course see the updated USDA estimates next week and according to a survey released by Reuters yesterday the trade is expecting to see domestic ending stocks raised around 6 million bushels to 660 million. Not a huge shift but if correct, higher nevertheless. The International Grain Council already bumped up world production estimates and now the FAO has increased the world 2014/15 production by 4.1 MMT. According to the Reuters survey, the trade is expecting the USDA to reflect little change for either the 2013/14 or 2014/15 ending stock with average estimates of 185.53 and 192.15 MMT respectively. Can that leave us susceptible to a surprise in light of the others?

While not unexpected, export sales did not provide much in the way of support this morning. We recorded sales for the 2014/15 marketing year of 265,800 MT 9.77 million bushels. This number is 40% below last week and 32% below the 4-week average. The top purchasers were Mexico for 52.1k MT, the Philippines with 50k MT and Yemen taking 45k MT.

In many respects, none of this is fresh or surprising news for the wheat market so should be already reflected into recent trade. That said, with no major growing threats on the horizon, we could be dealing with a market that has moved into an extended sideways pattern with limited potential both higher and lower.

Corn

The corn market did experience a nice little bounce after reaching down into support yesterday but the turn around did little of nothing to shift the current picture. It appeared to be market noise. Prices have been soft overnight and the lackluster export sales did little to shore up the confidence of the bull.

For the week ending October 30th we sold 478,200 MT or 18.83 million bushels of corn. This number was just 2% below last week, which of course was not good and is 55% below the 4-week average. For a point of reference, last year for this same week we sold 66.9 million bushels. The top purchasers were unknown destinations at 195.7k MT, Peru with 76.5k MT and Mexico at 69.1k MT.

While maybe not much more than a footnote at this time, Bloomberg News commissioned SGS SA to conduct a survey of Chinese farmers as to crop production that past year and according to the number released, drought in many regions has created the first drop in corn production in the past four years. Now we need to keep in perspective that China has boosted production over 30% during this decade and if anything has been having difficulty managing the inventory, but they are also the worlds second largest user of corn. This should not pose any problems this year but if they have trouble again next season, who knows, they may just see fit to want to approve more GMO varieties.

Markets could now be in a state of limbo as we look out to the reports on Monday. According to the Reuters survey the average estimate for yield is 175.23 with production of 14.551 billion. As you might suspect, this is virtually identical to the Bloomberg survey we reported yesterday. Realistically the number to really watch will be carryout of which the average projection stands at 2.135 billion. If we do not see export sales pick up a little momentum, even that may be optimistic.

Soybeans

After testing the 10.00 level early yesterday the bean market did catch a nice rebound with funds estimated to have purchased around 6,000 contracts. I am not sure if beans were leading meal or if it were the other way around but we were able to extend the gains a bit into this morning but holding on may be challenging.

Bean export sales were solid once again as we peddled 1,609,800 MT or 59.2 million bushels. This figure was 28% above the previous week and 22% higher than the 4-week average. I might was well just say the buyer was China as they purchased 1,604,200 MT. As I have commented before, you have to ask what will happen when they step away? There is always the chance that South America will experience weather issues and the buying will continue, but right now that does not appear to be on the radar, physically or figuratively. Note that while the meal market is still a bit higher this morning, we posted a negative export sales figure for that commodity.

Looking out to Monday the survey du jour from Reuters has the average yield at 47.6 and total production of 3.967, still just below that 4 billion mark. The average estimate for carryout is 442 million bushels, which would be a reduction of 8 million bushels from the October USDA estimate. 2014/15 World ending stocks are expected to come in at 90.37 MMT which would also be a slight reduction but keep in perspective, that is still a new record for raw inventory and as a stocks to usage ratio by quite a large margin. I suspect we have market chop in line between now and Monday.

While we did take a little breather yesterday, with the election results and the Republicans taking control of both the House and the Senate the U.S. Dollar has spiked higher once again this morning reaching up to the highest levels since the middle of 2010. We are now up over 11% since the lows post this past spring and just over 20% from the lows posted in 2011. If something sounds vaguely familiar with this it should as commodity markets have been the mirror image of this move and as would be expected, we have been tracking lower as the dollar advances. There are always exceptions such as the livestock markets but note that grains, metals and energies have all be tracking lower since spring, right when the dollar turned higher. I read this morning that even iron and lead have dropped to the lowest levels in four to five years all of which are reflected in commodity indexes that are now at the lowest levels witnessed since 2010. The Goldman Sachs commodity index actually sits just below the mid point of the extreme low posted in late 2008 and early 2009 and the last major high in the spring of 2011.

I intend to cover this a bit more in-depth in the weekly newsletter but this would appear to be the classic case of everyone thinking the same way and all rushing the one side of the ship. While the bad news is there is nothing to say we have completed the bear move, when just about every publication feature stories about the rising dollar and falling commodities, I have to believe we are getting very close.

Wheat

This seems to becoming akin to Chicken Little yelling that the sky is falling but there are reports once again that there could be an El Nino developing. It seems that since about January/February this year there have been occasional but consistent predictions that sea surface temperatures in the Pacific are rising but so far never turned into anything but a neutral condition. The latest updates are giving basically a 50/50 chance of this developing into something more. At this time of the year, I am not sure that would be particularly bullish. We are beyond the monsoon season in Southeast Asia and the wheat crop is on the way in Australia so an event right now should not create major disruptions unless it intensified and lasted will into next year. In South American, such an event generally brings above average rainfall. Regardless, it will provide us with something to talk about in the months ahead.

More immediate for our concern is the winter ahead. A good friend who is a meteorologist sent me an article this week that explained that the newest “hot” topic (no pun intended) in the weather world is to talk about the “Siberian Snow Cover.” The theory is that heavy snow cover in Siberia produces higher surface pressure patterns that in turn can drive the Artic Oscillation into a negative phase which can then produce more frequent Artic outbreaks in the central and eastern U.S. This is what occurred last year, which you will recall was one of the coldest and snowiest winters in years. In case you are wondering, the October Siberian Snow Cover is near record levels. If the theory is correct, you might want to buy a few more blankets for the season ahead.

There is not much else that I can report for the wheat market this morning. The domestic numbers next week for this commodity will basically be a footnote. The trade will be looking for a slight increase, maybe 5 million bushels for ending stock and for the world figures, possibly a slight decrease.

Corn

Corn has been under pressure through most of the evening and has pressed back down against key support around 3.60 and so far appears to have held. The bigger question is of course if it can continue to do so in the days ahead? Yesterday funds sold around 11,000 contracts.

With nothing threatening in the domestic weather outlook it would appear this harvest will be basically wrapping up in good order during November so the only topic of discussion right now pertain to what the government might say next week. As you have probably read at this point, Informa released their estimates yesterday and while not nearly as large a FC Stone, they were still higher than the October USDA estimate, coming in with a yield of 174.4, and production of 14.493. This compares with 174.2 and 14.475 from Uncle Sam. Bloomberg released a trade survey they had taken which uncovered averages of 175.3 and 14.556. In the greater scheme of things, production increases of 20 to 70 million bushels are not all that significant but with the USDA already posting very optimistic usage numbers, any increases could go right to the bottom line and higher ending stocks are not a positive.

Outside of this, we have little else to focus on. Weekly ethanol numbers later today and export sales in the morning but we should not see anything out of the ordinary. Support in December futures should be relatively solid from 3.60 all the way down to 3.50 but without something positive next Monday, we could see an exodus of the recent buyers.

Soybeans

Nearby bean futures have returned to the 10.00 level once again but there would not appear to be much for the bull to hang onto at this point. China has reported that they are expecting over 5.8 MMT of beans to arrive at their ports in November and then another 6.8 MMT in December so there should be no issues with availability there. The bigger concern may be Avian Flu and the negative impact that could have on feed usage over the winter months. As I have commented previously, with China regularly representing 70 to 80% of the weekly bean sales, you have to believe they have heavily front loaded their purchases and unless we see a problem develop in South America, they will divert that business their once they are comfortable with availability.

Informa published a bean yield estimate of 47.9 b/p/a, which is 8/10th of a bushel higher than the October USDA figure. This would project a crop of 3.991 billion according to their estimate. The Bloomberg survey came up with a yield of 47.6 and crop of 3.969 billion. Keep in perspective that a higher yield will produce a larger record setting number but as I have commented previously, I believe the 4 billion mark which if breeched, would be the psychological kiss of death to the bull.

The action between now and Monday may produce little more than market noise.

It is Election Day here in the United States and while I know many producers are busy with harvest, I certainly encourage you to take the time to vote. While you may or may not have a key race in your area it is still critical that we stand up and endorse that which we believe in. If you are in Colorado or Oregon, as you are aware there are GMO labeling regulations on the ballot and you can be assured these will not be the last and we in the diminishing Ag community need to continue to make our voices heard.

Wheat

The wheat market was able to buck the trend of corn and beans yesterday and close higher. The only real piece of supportive news that I could uncover was additional discussion about the cold temperatures in Russia and Eastern Europe and the potential damage that could cause with winter wheat. It is encouraging that we can find support off of such news but I do not suspect it would be enough to carry this market very far without something additional to help the cause. Gauging from the overnight action, we have not found that extra incentive just yet.

We certainly did not find any help from the export inspections last week. Granted the port capacity was being tied up moving a record number of beans but we still only loaded 7.7 million bushels, which is the second week in a row below 8. The 10-week average is 18.5 million and moving ahead we now need to step up the weekly loadings to 17.4 million to reach the USDA target of 925 million.

There was not a lot to report from the weekly crop updates as winter wheat planting has reached 90%, which is 1% ahead of average and emergence was reported at 77% compared with a normal 72%. Conditions were unchanged from last week at 59% good/excellent, which is just a bit below last year at 63%.

The pressure this morning has just basically erased the gains from yesterday but with the additional selling in corn and beans, I would not expect wheat to be able to buck the current today. After just over a month of strength, this market is beginning to look weary.

Corn

The corn market really held quite well yesterday in face of virtually no positive news but it would appear that cannot be said again today. December futures have pressed back below the 3.70 level of support and bulls are dangerously close to slipping over the edge of the cliff once again.

In many respects the export inspections for corn were even more discouraging than wheat. We loaded 16.8 million bushels, which set a new low for the marketing year and were over 40% below the marketing year average of 30 million. Granted, we still have 43 weeks left in the marketing year but at this point to reach the USDA target of 1.75 billion bushels we will need to step the pace up to 34.4 million per week. So far there have only been 4 out of the 9 weeks in the year that we have been above that mark.

The corn harvest completed picked up 19% during the past week bringing it to 65%. This is still 8% behind the average pace. Illinois has basically caught up to average but Indiana is 12% behind, Iowa 14%, Nebraska 11%, Michigan 20% and the furthest off pace Wisconsin; 25% behind normal.

Estimates for the November 10th report are filtering in. FC Stone actually lowered their number a touch from their previous estimate and have a yield of 178 for a crop of 14.783 billion. Keep in perspective they were already well above the USDA October release of 14.475 billion and as you can see they are still 308 million above the government. The Hueber Report is looking for a yield number of 176.8 with production at 14.684. Informa should release their estimates later this morning.

I had thought that with the light selling pressure we had witnessed yesterday we would be in line for a Tuesday undo bounce today but as we can see in the early trade, that has not been the case. While that could still happen during the day trade with the weather outlook conducive to continued solid harvest activity and the report looming less than a week away, this market is looking quite top heavy.

Soybeans

We should probably not make too big a deal about a single week of export inspections but it was a little surprising that the trade did not respond much to the record shipments for last week. As you have probably read, we loaded 101.8 million bushels from our ports, which sets a new record. In face of that the market barely registered a bump after the release remaining under pressure then into the close. Prices did try and trade a smidge higher in the overnight but sellers returned once again. Does this constitute failure to react to positive news? As I commented yesterday, farmers both here and in Argentina have rewarded this recent advance.

The harvest completion was right at expectations and right at the 5-year average of 83%. The states furthest off the pace at this point are all in the south with Kentucky 51% harvested vs. the normal 69%, Missouri 64% vs. 70% and Tennessee at 62% compared with 66%. Indiana and Ohio are both running behind pace but each are above the 70% level.

The latest breakdown from Brazil indicates a slower than normal planting pace but good headway being made. Mato Grosso, which is the largest bean producing state planting is projected to have reached 31%, Parana 47%, Rio Grande do Sul just 3% and in the Northeastern regions around 5%.

FC Stone left their yield estimate unchanged at 48.4 but did lower the production through an acreage cut to 4.033 billion. This would still be 106 million above the last USDA figure and I have to imagine that if the government printed a number north of 4 billion it would deliver a hard psychological blow to the bulls. The Hueber Report estimates yield at 47.7 with production at 3.984 billion.

The pressure today has not completely spooked the bull but I suspect if we violate 10.10 in November futures it could touch off a rush for the exits. The logistical problems of last week have been pushed to the back burners but could flare up again but lacking that, right now it would appear we have little to sustain prices at the current levels.

Grain and soy markets have begun this new trading month under pressure but in light of recent advances, the selling has not been significant. Realistically we are looking at a general commodity decline, with the exception of energies, but most everything else appears to be under pressure. For a number of markets including gold and silver this is an extension lower of selling last week that was prompted by the dollar pushing into higher highs.

We do not have much wheat specific news this morning and that which is around is mixed. On the tender last week Egypt purchased French wheat and while the quantities were not huge, it is that constant reminder of just how competitive and abundant the world market is right now.

There continues to be concern raised about the exceptionally cold temperatures that have been experienced in Russia and Eastern European winter wheat growing regions. There is one private estimate already that has warned the Russian crop could drop to as low as 54 MMT next year. While the guesses for the current crop ranges from 57.5 to 61.5, if correct we should begin pulling lower world stocks in this is correct.

While it should have less of an impact on wheat, I suspect much of the focus of the trade will quickly shift to the November 10th crop production report. Estimates should begin filtering in today and I suspect most will reflect ideas of larger numbers than the October reports.

Corn

The corn market has been under pressure all night but so far the losses have really been pretty insignificant as we have not even traded outside of Friday’s ranges. As I commented under wheat, at least a portion of the pressure this morning has been general commodity selling with the U.S. Dollar extending into higher highs and reaching the highest point traded since June 2010. It is interesting to note how the psychology of the market has shifted over the past month or so as in September the rising dollar was striking fear into the hearts of bulls every day.

Other than a residual effect of last week’s buying and the uncertainly of the situation in meal, there would appear to be little to encouraging buying in the corn market right now. U.S. producers should have made great headway with harvest over the past week and the trade will be expecting this afternoon’s reports to reflect completion between 60 and 65%. On top of that, outside of a few nuisance showers in the eastern Corn Belt, the weather appears good for most of this week. This should shift most of the attention to the November 10th crop production report. Keep in perspective as well that this is the final production report for the calendar year so we will live with these numbers until January.

Although China has been visibly absent from the U.S. corn for the past year due to the controversy over non-approved GMO’s they still remain active purchasing feed grain but now in the form of sorghum. It is projected they will import 4.3 MMT this crop year which will make it their top grain import for the first time ever. There are those who would maintain that once the GMO issue is settled they will forgo the sorghum for corn once again but from what I can read, there is a push from within to develop a more balanced import program and if correct, should be bonus for sorghum/milo growers in the U.S.

I suspect we will need to push December corn back below the 3.68/3.70 level, preferably on a close to turn the tide back lower. While I suspect we will be successful in doing so, we could continue to chop around the existing range for a few more days.

Soybeans

While the meal squeeze of 2014 appears to be healing, I suspect the bears will not want to jump back on board until there is a touch more confirmation. Once bitten, twice shy. That said, other than this concern, there would appear to be little to prop prices up.

Harvest should be moving into the final stages and the trade will be looking for a completion number between 80 and 85% this afternoon. On the rally last week it would appear that farm selling picked up not only in the U.S. but in Argentina as well where producers have tenaciously hung on to last years crop.

The planting pace appears to be moving along very nicely in Brazil and into good conditions on top of that. Nationwide they should be above 35% complete and it was reported last Friday that Parana had reached 47% complete with the crop rated 96% good or higher. Further south planting is just getting under way and it is estimated that Rio Grande do Sul is just 1% complete.

A month ago all you could hear about were reports of record setting yields on beans but that discussion has fallen silent since prices began to rally. Does that mean yields tapered? While possible, I think it was more a situation that we had heard it too often and the trade lost interest and needed something fresh to focus on. We shall find out if that is correct next week and I suspect, there will be a few people expecting to see a number printed north of the 4 billion bushel mark.

We are soon to wrap up another month and it has been an exciting one at that. It is not often that you can say that grain and soy markets have posted one of the best advances in a year during the month of October, particularly in a year of record production numbers. I still suspect though that once the calendar has rolled over into the month of November it will be challenging to hold these gains, particularly as U.S. origin products are not very competitive on the world stage at this time.

Wheat

There was little fanfare surrounding the release but the International Grains Council did update their world production estimates yesterday. They now expect world wheat production to reach 696.4 MMT, which is up 3.8 MMT from their estimate last month and would be 41.5 MMT higher than what was produced last year. As would be expected, there are some who will argue with the figure particularly with recent discussion about lower numbers expected from Russia but the undeniable truth is we do not have supply issues with wheat at this time. Quality and location may be another story.

Wheat is under moderate pressure this morning but certainly nothing that would panic any recent buyers. That said, without something fresh to feed the bull next week it would appear the stage is set for a turn lower in November.

Corn

The is no denying that the corn market has posted an impressive rally here in the month of October, advancing almost 20% from the lows in a nice two-wave pattern. It definitely had help initially from the wheat and then the meal/beans but it appears those drivers have begun to run low on fuel at this point. If they cannot find a station soon odds are they will stall out.

The International Grains Council also bumped up their corn estimate placing world crop production at a new record of 948.4 MMT, up 5.2 MMT. Production last year was estimated to be 862.7 MMT.

Although there were a few snowflakes drifting around the upper Midwest this morning the weather this week should have allowed for great harvest progress and should again for next week. The biggest limiting factor for many has been the capacity to handle the quantity. I suspect we should be above the 60% level on next weeks’ reports.

Outside of that, the overall news is quiet this morning and being a month end I would not expect to see much new interest other than possible pre hedge. If there were short covering that needed to be done, I suspect that is now behind us. A close below 3.71 today would be a disappointment for bull and a close below 3.62 ½ today would confirm a turn back lower.

Soybeans

October will have turned out to be one of the biggest gains in nearly two years and of course the obvious question now is has this been enough? It sounds as if the livestock operations in the east have booked enough meal via alternative transportation to carry them over the hump assuming more issues do not arise.

The trade will be looking for harvest to have pushed into the 80 to 85% range on the reports last week and if correct we will certainly be in the final push. On the other side of the equator, it sounds like farmers in Brazil are making great progress at this time and should be into the 30 to 35% complete level. The most recent update from Argentina has planting at 4%.

The International Grains Council actually backed down their estimate for world soybean production placing it at 307 MMT versus 310 MMT on the last estimate. The market did not bat an eye as this is still a record number as are the projected world ending stocks.

At this point, we should have short covering pretty well taken care of and seeing this is the last day of the month I cannot imagine we will see much in the way of new business from the spec sector. That said weekend pre-hedging could materialize late in the day. Failure to close above the 10.00 today would likely be a letdown for the bull.

Another day of solid buying sent prices across the floor higher again yesterday. While for the corn and bean trade this would still appear to be counter intuitive to the time of year and the size of the crops we are dealing with, but for wheat we can find actually rationale for the advance.

As I have commented in previous letters, the supply situation has basically been a known entity for some time, which should have been well factored into the price structure. At this point, we have not exactly been overwhelmed with demand of U.S. products but little by little we keep hearing news that world production was maybe not quite as large as anticipated and we have been making price adjustments to reflect the potential difference. This does not mean we have changed the scenario from bearish to bullish but rather from bearish to neutral with a need to correct an oversold position. Yesterday the US attaché in Russia released an estimate that the wheat crop there could be 57.5 MMT vs. the previous estimate of 59 and of course at the lows there was talk that the crop could reach the 60 to 61 MMT level. Brazil is also talking about lowering their estimates. We already know there have been quality issues down there due to late rains but the weather turned dry and harvest has advanced very nicely but yields have been less than expected as they have pushed along. The states of Parana and Rio Grande do Sul produce 93% of the total. Parana is now estimated to be 75% harvested but Rio is just beginning harvest. The current estimate by Conab is for a total crop of 7.6 MMT, which in the greater scheme only represent around 1% of the total world production but when you trim a million here and a half million there from what we had factored into prices it demands the market adjust.

Export sales did see an uptick this past week as we sold 444,900 MT or 16.3 million bushels. This was 49% higher than a week ago, 5% below the 4-week average and 4% above the 10-week average. The best purchasers were Japan for 88.2k MT, Mexico for 57.3k MT and Brazil at 56.1k MT.

All that said, we have seen December wheat futures advance 15% now over the past month (17%) for spot, reaching back to prices not witnessed since late summer. I have to believe this advance has done a good job of rebalancing the position of traders as well as adjusting to the possible changes in world supply. While I would not look for a new bear trend to develop it would appear we have reached a solid level of resistance and are into an overbought position and as such, continue to believe we should see prices back track in November.

Corn

The buying frenzy continued in the corn market again yesterday and into the overnight hours but it is a bit more difficult to come up with the same rationale for corn as you can in the wheat market. Regardless, we have now seen December futures advance almost 20% from the lows and have returned to the same levels that we were trading at back in August. Now granted, as the U.S. harvest has extended north instead of hearing story after story of record yields the reports have been more about average yields. Will this be the year that breaks the trend of large crops becoming successfully larger on each report? While the possibility could exist, we are going to wait until November 10th to find out and unless yields have been overstated by around 7 b/p/a, we have probably rallied too far.

One thing that can be said for certain this week is that the price rally has not been a positive influence on our exports sales activity. For the week ending October 23rd we sold 489,900 MT or 19.3 million bushels. This is less than half of last week, 55% lower than the 4-week average and the lowest number of the marketing year to date. The best buyers for the week were South Korea at 137.4k MT, Peru at 88.7k MT and Mexico taking 82.3k MT. Total sales for the marketing year now stand at 737.8 million bushels, 63.5 million behind the same time last year.

Regardless, buyers have not given up yet this morning but I have to believe they are operating on borrowed time at this point. Next week will usher in a new month and it is not unusual for the corn market to post highs and or lows right around beginning/end of a month if there has been a well-defined direction leading into that time frame. I suspect that attention next week will turn to the November production and supply/demand reports and with this advance, it should be interesting to see what kind of private estimates are released.

Soybeans

Shorts were squeezed hard again yesterday as beans, meal and oil all three pressed into higher highs. It is estimated that funds purchased around 16,000 contracts of beans, 8,000 contracts of meal and 5,000 contracts of bean oil. Prices did extend higher overnight but have since seen a wave of selling and while it would be premature to call that an exhaustion top, we should be extremely close.

As has been well publicized, the move appears to have been stimulated by transportation issues and the inability to move meal from crushers in the Midwest to feed markets in the east. It would appear that we have now provided enough financial incentive to truck the product and I understand that it has also now penciled out economically that we could begin importing meal from South America. The market appears to be serving its function.

While down 39% from the controversial number last week, bean export sales were still solid at 1,326,000 MT or 48.7 million bushels. This is actually 10% below the four-week average but that is somewhat skewed by last weeks figure. The weekly average for the marketing year to date has been 52 million. Surprise, surprise, the largest purchaser for the week was China taking 1.05 MMT (79%) then followed by Portugal at 71.5k MT and Egypt at 50k MT. Does anyone else have a feeling that this Chinese business will be switched elsewhere once the size of the South American crop is known?

As with corn, we have pushed the bean market up to the highest levels witnessed since late summer and into very overbought positions. Certainly there have been some less than stellar yield reports as the harvest has moved into the latter stages but not to the extent of what we have heard in corn. Were the yields overstated by almost 4% on the October report? I guess we will find out on the 10th but I am not ready to jump over to that camp just yet.

While the action has been subdued in relationship to beans and corn, wheat is trying to climb higher once again this morning. A higher close would make it three in a row but at least at this point, we have not been able to reach up to the highs posted this past Friday.

On the news front there is little additional that I can add to the wheat story. There are continued concerns about abnormally cold weather in Eastern Europe and into Russia. That said, it was reported overnight that Russian exports to date are running over 32% above a year ago at this time. There are a few tenders floating around but I suspect the sales tomorrow morning will once again be on the low side as we are still not really competitive on the world stage. Of course, no one expected the beans sales last week either.

Harvest in Brazil has finally been able to pick up and it was reported that in the state of Parana they have reached 72% complete. This would actually be 12% ahead of the pace last year. Also, yesterday it was announced that Argentina would be able to supply at least 5.5 MMT of wheat to Brazil this coming year.

I continue to believe that December futures will encounter very stiff resistance around the 5.40 level and should be within days of turning back lower.

Corn

While this move has really been about meal and beans we have done a pretty reasonable job of forcing the corn short out as well. That said the failure to hold the gains yesterday may have been the first sign that the move has about run its course. Prices have been firmer again overnight but so far have lacked the enthusiasm to reach back against yesterday’s highs.

I understand that farmers have been rewarding this move as selling picked up notably yesterday. We will have the weekly ethanol report issued later this morning, which should reflect a production of at least 900,000 bbd and export sales in the morning. Like wheat, U.S. corn on a FOB basis is not competitive.

We have scattered showers in the forecast across the upper Midwest over the next few days and cooler temperature but nothing that should create major disruptions with harvest. Yield reports continue to range from average to exceptional. I suspect once we have rolled the calendar over to November, the focus and discussion will revert to the next crop production estimate, which by the way will be the final one of the calendar year.

Unless we see another shock move from meal, it would appear that this corn move has pretty well expended itself. As such, I expect to see prices track lower then into at least Thanksgiving.

Soybeans

The bean market surrendered the majority of days gains by the close yesterday and although we have bounced again overnight, we are contained within Tuesday’s action. As I commented yesterday, the situation that we are facing in meal and beans is logistical in nature and the job of the market is to provide economic incentive to try and correct that. While that can be accomplished by making other substitute products economically viable but also help to compensate for additional transportation expenses. It has been reported that trucks from the eastern and southeastern feed market have been arriving at processing plants to haul meal. Not as efficient as rail but should help alleviate the problem for the interim. There has already been discussion of the competitiveness of bringing South American meal into the east coast and while probably not economically feasible at this point, could also provide an alternative.

Rains have continued to fall through what had been the hot and dry regions of Brazil and it would appear the dry pattern has been broken. The late arriving rains though have meant a late start to planting as well and it is estimated that it stands at less that half of a year ago with 15 to 17% of the country planted. Parana is estimated to have 30% of the crop planted, Mato Grosso do Sul 24%, Matto Grosso at 16% and Goias at 8%.

Farmer selling has reportedly picked up nicely over the past couple days. We could still easily see the bean market hold at these levels for the next day or so as the market tries to sort out these transportation issues but I continue to believe as with the corn and wheat trade that we should see the scale tip lower in November as we refocus on the upcoming November USDA estimates.

We witnessed a surprisingly sharp turnaround in prices yesterday that has now bled over into this mornings’ trade. This has been led by meal, which in turn has pulled up beans and in turn brought corn and wheat along for the ride. When you see a move such as this which would appear to fly in the face of the overall fundamental picture as we know it, it is only logical to ask if something has shifted in the underlying picture or is this one of those aberrations that markets throw at us now and again after we have leaned to heavily to one side or the other? From everything I can gather, the move in meal and hence the rest of the board is logistical in nature, not something structural. There has been a story circulating that there is a shortage of methionine, which necessitates need for additional meal in hog rations that I am trying to confirm. Even if that is correct, the move while exciting and surprising in the extent of the strength, is still most likely quite temporary in nature. Prices will move enough to either provide the financial incentive to correct the logistical problem or open the door for a substitute product to take over. Recognize that if this is the case, we have not really changed the underlying fundamentals and in fact could make them worse. Of course once a move begins we throw all sorts of other reasons into the mix to validate what is happening.

While there is nothing to say we will not just continue feeding bits and pieces of positive news into these market I suspect that we will see all this move exhaust this week. The advance has been solid enough to suggest we may have the extreme lows in place but even if that were to be the case, I expect to see an extended period of base building to determine if the underlying fundamental picture is actually transitioning. Often times people will use the analogy of a ship turning when discussing changes in the economics and that same should apply here as well. It has required the better part of two years to move from tight world stocks to an overabundance and it will require additional time before we really begin to eat away at those stocks.

Wheat

Winter wheat planting increased another 8% this past week bringing it to 84% complete and right on the historical average. Emergence stands at 67%, no pun intended, which is 5% ahead of normal. On the first conditions report of the fall, we have 59% of the crop in the good to excellent range, which is actually a touch lower than last year at 61%.

Export inspection were certainly nothing to encourage the buyer as last week we loaded only 7.81 million bushels. This number was less than 50% of the previous week and of the same period a year ago. This brings the marketing year to date total up to 394,382,845 bushels, which is 33% behind last year at this date.

Even with the strength yesterday and overnight, wheat has not been able to reach up and challenge last week’s highs. I suspect we should be ready to turn lower again by the end of this week.

Corn

With the overnight strength, December corn has been able to stretch up to the highest levels since late August and a bit deeper into a congestion range between 3.60 and 3.80 that we were stuck within back then. Is the market trying to tell us that the average yield will be back at 167.4 and carryout at 1.8 billion as per the August report? I am not sure if anyone is ready to go that far at this point.

Crop progress came in very close to trade expectations as we took in another 14% least week with the completion now at 46%. This is behind the normal 65%. If the slower pace is due to late bean harvest, high moisture, logistical issues or large yield would seem to matter little at this point the forecast looks very good for the weeks ahead.

Export inspections were consistent but uninspired at 27.68 million bushels. This compares with last week at 28.25 and last year at 26.96. Year to date we have now moved 251,860,179 bushels compared with 175,351,837 a year ago at this time.

I was surprised to see nearby futures poke through the 3.70 level this morning but the time spent there so far was pretty brief. I continue to believe that we will see prices exhaust this week and should then track lower into Thanksgiving and possibly through the end of the year.

Soybeans

Of course meal has been the real driving force on this advance but the net result in the bean market has been to see November futures push back above the 10.00 level for the first time since September and this morning to the highest point traded since just after the labor day weekend. Using the same reasoning that I did in corn, is the market trying to tell us the crop will be closer to the August estimate of 3.816 billion bushels and a carryout of 430 million than the more recent October estimates of 3.927 billion and 450 million? That could be a tough sell to back up.

The harvest progress came in at the lower end of estimates showing 70% complete. I guess both bulls and bears could try and spin that number for their own purposes but the reality is we still have 30% of the harvest to come in, the weather outlook is good and this is generally the portion we see movement.

Beans have found their way into the export channel as inspections were very solid once again. For the week ending 10/23 we loaded 80.68 million bushels. This was 6.3 million higher than a week ago but 4.88 million less than a year ago. Year to date we have moved 300,256,577 bushels compared with 261,973,147 bushels last year at this time.

Planting progress in Brazil remain behind normal but solid advance are being made and now with good moisture to boot. It is estimated that planting progress is nearing 15%.

While I cannot say that the logistical problems that have created the meal rally have been corrected but each day that passes brings us closer to doing so. There is not an issue with bean availability at crusher right now. All that said, as with corn and wheat, I suspect this rally should exhaust this week and if correct should see prices turn lower again in November.

Grain and soy market have all begun this final week of October under pressure, following through from the weak closes posted last Friday. Outside of a clear domestic weather outlook, news is very sparse this morning.

While still under pressure, we could be seeing a little support in wheat over concerns about the abnormally cold temperatures in Eastern Europe and Russia. Granted, it would seem a bit premature to think we could generate a lot of buying in response to this, but seeing that it was also quite dry in a number of regions at planting, it is something that will bear keeping an eye on. Domestic prices in Russia have now risen for a second week.

Domestically, we should have the winter crop planting pretty well wrapped up and this afternoon the USDA should provide the first crop rating of the season.

On Friday December futures posted an outside lower reversal, which should confirm we have the initial corrective rally complete. I suspect the action in corn and beans will tug wheat to and fro but it would appear we should now be in a negative corrective mode potentially into Thanksgiving.

Corn

It sounds so simple but the corn market should be directed by weather and yield reports for the upcoming week and both are keeping pressure on this morning. As the harvest presses further north, there have been increasing stories of disappointing yields but that can be a nebulous comment. This year, disappointing has often meant average yields but of course at $3 cash, average yields are very disappointing financially.

The trade will be looking for harvest to have moved into the 40 to 45% complete range on this afternoons report and with the current outlook, we should have the biggest week of the season ahead of us. Other than a few possible showers at mid-week, the outlook appears excellent. That said, I have spoken with more and more producers who reports moisture levels are just not coming down and with the corn standing very well, are in no hurry to spend additional money on drying if mother nature can help first.

In the southern hemisphere Brazilian farmers have been slow to move into the fields but with the recent rains, they should be ready to roll. Also providing extra incentive was the re-election of President Rousseff, which has sent the Real lower. Brazilian crops are priced in U.S. Dollars so this should be a bonus for farmers.

While under pressure this morning, by no means have we collapsed. Closing December futures back below 3.50 should be a let down for the bull and a push and close below 3.42 would confirm we have a reaction high in place and should open the door for a swing at least back down against the lows.

Soybeans

November beans have actually gapped just a bit lower this morning but have not really run from there. Gaps like this usually tell us little more than buyers are exhausted but seeing that we are beginning to turn indicators lower, we should be signaling that this bounce is complete.

This afternoon we should see harvest progress reported between 70 and 75% complete and with the current weather outlook, this week should move this harvest into the twilight stage. This should translate into a reasonably accurate number for the November crop production report. The release will be on Monday the 10th.

Central and Northern Brazil have been receiving the much needed moisture and we should see the planting pace pick up rapidly. As I commented under corn, the election results in that country over the weekend should provide a boost for the Brazilian farmer as their products are prices and U.S. Dollars and the Real has been under pressure. It is now at the lowest level seen since 2008 and is down 40% from the last high in 2011.

I suspect we will have to push November futures down through the 9.50 level to begin forcing out the bulls and a push and close below 9.36 should confirm a reaction high. I continue to remain in the camp that believe we have potential to extend the bean market into lower lows before we have complete this overall downswing.

Be it short covering or fresh buying, funds have been the dominant buy force this week. Of course when that occurs it can push values into buy stops, which continues to perpetuate the move until we have wrung out the final stop. Seeing that we have continued to extend higher overnight, that would not appear to be the case just.

For the wheat especially at this point you have to look far and wide for a solid reason to support this advance. Export sales were sub-par again this week and domestically we appear to have the winter crop going in in good shape. As I commented yesterday, there are a few minor concerns about the cold temps in Eastern Europe and Russia but I do not suspect that will entice too many buyers in the arena just yet. It was also confirmed overnight that Argentina did authorize another 400,000 tons of wheat for export so the world market certainly does not lack any supply at this time.

December futures have pushed up close to what I believe should be the upper limits of this initial bounce around 5.40 and while we could extend this move into next week, believe we are encroaching into borrowed time and price at this point.

Corn

Several weeks ago I stated that I felt the corn market was entering the bottoming stage of this decline but readily admit, I did not anticipate this robust of an initial rally from the lows. We are actually on the cusp of turning longer-term indicators higher, but keep in mind we have not done so and this move appears to be pushing us to the outer limits of reason for the time being. In other words, it would appear we have overbalanced the move to the upside.

Granted, export sales were decent last week but I have to suspect the 9,000 contracts purchased by funds were more technically inspired than fundamentally. World demand can afford to be picky this year as evidenced by reports overnight that Vietnam reneging on corn and meal purchases as world prices had dropped significantly since made. I understand that have refused at least 200k MT of corn and 150k MT of soy meal and the sellers are scrambling to find new homes. Vietnam is one of the rising markets for feed grains and it would appear that have taken a few lessons from their neighbors to the north on grain trading.

At home, the weather outlook appears great to keep moving our harvest forward. Light showers are possible for the middle of next week but outside of that the next 10 to 15 days look clean. The corn harvest should reach 40 to 45% by Sunday.

December futures have pushed into a congestion range that was established back in August between 3.61 and 3.75 and with daily indicators into the overbought zone, I have to believe we are within days of exhausting the rebound. If correct, it would appear the bears could end up with the turkey for Thanksgiving.

Soybeans

The biggest action/news/controversies were centered in the bean market yesterday and I understand funds were buyers of over 14,000 contracts. The initial stimulus was the solid export sales that pushed prices into the next round of buyers stops and so on and so on.

There has been quite a bit of discussion and debate about that export sales report as there had been nothing recorded on the daily reporting system. It is required that sales over 100k MT must be reported within 24 hours. There has been speculation that a) there was a mistake in the reporting b) these are actually South American beans and c) these were purchases made on the annual Chinese delegation trip. Regardless of how these are accounted for, they are not out of line with the projected sales and when you consider that China is representing such a large percentage of the early purchases, one has to believe we are going to be heavily front-loaded.

We have now finally been able to complete a 10% bounce in the bean market and while there is nothing magical that says that will stop the advance, I believe we are stretching the band out pretty taught. November options expire today and it will be interesting to see if we hold around the 10 mark. How many can we get to expire worthless?

At the beginning of October the bean market was caught leaning too heavily to the short side and it would appear we have done a good job of righting the ship. While there is always a possibility that we could uncover another surprise to scare more shorts next week or the week after but at some point, I have to believe the trade will return to the reality of the record crop we have produced this year. I suspect that will come sooner that later and look for prices to track back lower at least into Thanksgiving.

While not making much headway, the wheat market does continue to find buying interest but as noted previously, we are into what should be a very tough level of resistance. Domestically the news is relatively quiet but there are a few stories from outside the border of the U.S. that could be encouraging a little buying, or at least keeping the bear away.

The first is from Russia and Eastern Europe where temperatures have already turned cold. Both Moscow and Volgograd are reporting that the mercury has pushed into sub freezing levels and with little protection, could be impacting winter crops. The abnormal cold is expected to head west across the Black Sea into Eastern Europe as well. Another story making the rounds currently pertains more to a specific wheat, namely Durum that is used for making pasta flour. Globally, production will be at a 13 year low and prices have rallied to reflect such. While this should not have a significant bearing on overall wheat prices, psychologically it cannot hurt. Of course the gluten free crowd is probably not concerned as Durum is the does have the highest content of gluten which makes it ideal for pasta, but chances are will be all be paying more for our spaghetti in the months ahead.

While not a terrible surprise, export sales were sluggish for wheat coming in at just 299,300 MT or 11 million bushels. The best buyers were Japan at 92.3k MT, the Philippines at 68.7k MT and South Korea at 52k MT. For the year we have sold 539.9 million bushels and need to make average weekly sales of 12 million to reach the USDA target of 925 million.

I continue to believe that the current rally will exhaust over the next few days and we should see prices turn back lower through November.

Corn

The failure to hold gains yesterday would appear to be a leading indicator that we are pushing our current advance to the extremes. Prices have rebounded again this morning so evidently the bull is not prepared to surrender just yet but I find little in the news that would support much if any further gains from here.

Export sales were right at the top of trade estimates but still down 46% from last week at 1.0312 MMT or 40.6 million bushels. The top purchaser, taking over 50% of the total at 576.2k MT was unknown destinations, followed by Japan for 167.3k MT and then Jamaica with 86.4k MT. This brings the year to date sales up to 718.6 million bushels taking us back just below the pace of last year. To reach the USDA target of 1.75 billion we will need to average 22.9 million per week moving forward.

The overall weather outlook predicts clear sailing for harvest as we push into November so it would appear that the largest limiting factor will be the capacity to dry and handle the volume. I expect to see price begin to sputter over the next few days and the way this appears to be setting up, we may be headed lower then at least until Thanksgiving.

Soybeans

The reversal in beans yesterday did not really trigger any sell signals in other than very short-term indicators but would appear to be indicative of a market that is becoming exhausted. As with corn and wheat, we have rebounded this morning but remain within yesterday’s range and the overall acceptable corrective range as well.

South American weather updates reconfirm rains moving into the previously hot and dry regions and should signal a break in the pattern. Domestically the clear forecast should appear for a rapid completion of the bean harvest here and as I commented yesterday, we should discover soon if my theory of the tail end of harvest moving into the system is correct.

Export sales were very solid as we posted the second highest weekly sales for the year at 2,166,900 MT or 79.6 million bushels. I am sure it comes as no surprise to anyone that 78% of the sales went to China who bought 1.701 MMT followed then by Spain at 138k MT and Taiwan at 86k MT. As with any business, you need to be a bit concerned when the majority of your volume is with a single customer, especially one that we know can turn on a dime.

As I commented initially, the action yesterday was not enough to call for a high for the swing just yet but could very well have been a warning shot. As the old saying goes, the fat lady my have not begun to sing just yet but I am pretty sure I hear her warming up back stage.

As the old saying goes, a rising tide lifts all boats and that would appear to be the situation we are faced with in the grain and soy markets right now. Outside of previously contracted beans, limited additional quantities have found their way into processor hands and with good demand in the eastern US to refill the meal pipeline, we have seen meal post a solid rally and by extension this has bled over to the rest of these markets and created additional short covering. This of course right in the midst of harvest. When markets react in a fashion that would seem contrary to overall information at hand either there is a missing element that is creating a shift in the underlying picture or it is a temporary aberration at least partially stimulated by a market that is out of balance. I am sticking with the later.

Wheat

The wheat market has already been enjoying a four week short covering rally, which makes sense seeing we are basically post harvest but I have to believe that for the last day or so the strength has predominantly been coat tailing beans and corn. The Egyptian business has once again gone to Europe and Russia as U.S. values are just not competitive. There has been some support to world markets due to the fact that Argentina had not issued export licenses but that appears to have changed overnight as both old and new licenses have been released.

There is a possibility that we will be able to stretch this rebound out for a few more days but I suspect December futures will find substantial resistance north of 5.20. This reaction could very well be setting the stage to see prices head back lower at least until Thanksgiving and potentially through the end of the year.

Corn

Corn has now been able to extend the corrective rebound to higher highs with December futures reaching back against an old level of support at 3.61. We bounced from that mark several times during the month of August and is the level that we ultimately failed from after Labor day.

While the slower than normal pace of harvest has helped spur the short covering over the past few weeks, this really should have come as no surprise and of course only delays the inevitable. One of the benefits of the slow pace as noted in a paper published by the University of Illinois this week is that we have seen less of a bottleneck with handling the crop, which ultimately should help basis levels respond quicker.

One topic that appeared to provide support yesterday was the news from NASS that 80% of the physical acreage they use in estimates were harvested for the October number. At first observation, that sounds a bit strange as there was only 12% or so of the entire crop harvested at that point. Regardless the implication could be that there will be less of a chance for yield adjustment on future reports.

I understand that there has already been good interest in establishing bullish call strategies in March corn options on this advance. To a certain extent, I am sympathetic to this reasoning as after we have this crop tucked away, the focus will normally shift from supply to demand and can stimulate post harvest rallies. While this very well may be correct again this year, there are a couple caveats to think about. First is the carry as March futures have a 14 premium to December and May futures another 9 cents on top of that. Unless demand is better than anticipated, we should see those premiums erode. The second is the topic of demand. The USDA already has feed/residual usage at what appears to be a pretty lofty 5.375 billion and ethanol at a strong 5.125 billion. That leaves exports but with the current pace and plenty of feed wheat around the world, the 1.75 billion already being projected could be a stretch. While spot flat price should rally post harvest, much of this could already be factored into the spreads, which would work against option strategies with out using techniques to compensate for the premium. Time will tell but jumping on the call bandwagon right now could place one on bleeding edge not this leading edge.

As I commented initially, we have corn pressing back against what should be a very tough level of resistance. We could hold this range for a few more days but with the clear weather outlook and the majority of harvest yet ahead, we could be looking at a setup for prices to track lower now into Thanksgiving and possibly through the end of the year.

Soybeans

As I commented initially, the advance for the past couple days has been led most specifically by meal which of course has translated into higher highs in beans as well. As we all were aware, coming into this harvest, pipelines we nearly depleted of beans and meal and so far, it would appear the only thing coming into the system have been the previously contracted bushels. As I have commented previously, that is pretty typical as producers will often fill contracts and home storage first and then bring balance to town, so to speak. With the current weather outlook, we shall see if that theory holds correct. There has also been some speculation that the new beans have lower protein content and as such this will translate into a higher meal usage to compensate but I think I am going to call bulls—t on that one. Between DDG’s and feed wheat, there are more than enough ways to balance that protein in rations.

There remain concerns about weather and the planting pace in Brazil as temperatures in October across the middle of the country have ranged 10 to 20 degrees above normal with little rainfall. Granted, forecasts to not assure a change but models appear to be in agreement that their “monsoon” season is about to begin.

Even with the higher highs overnight, beans have not quite been able to complete a 10% rally from the lows, but we are close. We could now stretch out this corrective advance through then end of the month but I believe November futures should find significant resistance in this 9.85 to 10.00 zone and as with wheat and corn, this would appear to be setting us up for a push back lower into Thanksgiving.

It would appear to be Tuesday undo action in the grain and soy trade this morning as the markets that closed weaker yesterday are higher and the visa versa. Realistically we are confronting a drought of news right now, especially for wheat.

Export inspections last week did improve ever so slightly as we loaded 17.7 million bushels. This was a bit below the 10-week average of 21.2 million and brings the marketing year to date tally up to 386.5 million bushels. While we remain pretty much on track to meet the USDA target of 925 million, this number is running over 30% behind a year ago.

We also learned yesterday that the winter wheat planting increased 8% bringing it to 76% complete, which is just a percent behind average. As you would suspect, the Midwestern states where corn and bean harvest have lagged the most are the farthest off the normal pace but of course Illinois and Indiana really do not account for a large percentage of the overall winter wheat acreage. Emergence stood at 56% compared with the normal 50%.

There is a pretty standard line up of tenders in the world market right now but unless we have some type of logistical or program advantage, bargains are to be had elsewhere. We may be able to hold this range for a few more days but I suspect prices will still try and track lower once again into early November.

Corn

The corn market was able to squeak out a little gain yesterday and surrendered an equal amount overnight. I guess you could make this argument that in face of ongoing harvest this is a positive signal but that may be trying to read too much in the overall picture right now.

The pace of harvest continues to run behind average and while the wet weather last week would explain part of that, we should not lose sight of the fact that large crops take longer to harvest as everything from combines to trucks to dryers and handling equipment as taxed more heavily. Additionally, I have spoken with several clients recently who have commented they have run into quite a bit of high moisture corn once again (30% ) and are electing to remain patient waiting for Mother Nature to provide more natural drying. According to NASS as of Sunday we had harvested 31% of the crop compared to a normal 53%. While I am sure there will be a scattered shower here and there that could create a hindrance, the forecast for the next 10-days looks near ideal to move ahead.

Export inspections were not the reason corn was able to stabilize yesterday as we slid in beneath expectations. We loaded 28.3 million bushels, which was below the lowest estimates as well as the 10-week average of 36 million. Marketing year to date we now stand at 224.14 million bushels and now need to average 33.9 million per week to reach the USDA target of 1.75 billion. While it is probably premature to make too many predictions about corn usage I am in the camp that believes the USDA is using pretty optimistic numbers for both domestic and export usage for this year. Part of the danger in that is if we see higher production estimates in later reports, there will be little room to absorb that with usage.

Without a bullish shot in the arm over the next day or so to stimulate more short covering, I suspect this market should roll over and head back south into the end of this month.

Soybeans

Although lower, the bean market did a reasonable job of bouncing from the lows into the close yesterday and we have tried to erase the losses themselves in the overnight hours. Considering most of the news at hand that is almost impressive but I will hold that judgment at least until the close today.

I believe the most supportive factor in beans right now has been the concerns over the weather situation in Brazil. Too wet in the south and too hot and dry in the middle and northern reaches but the latest forecasts appear to call for a shift in the pattern. Rains have now returned to the central areas and temperatures have dropped and over the next 10-days potentially heavy rains are expected. In additional to that, the south is supposed to begin drying out. While forecasts are forecasts, if accurate it would appear to leave little for the bulls to hang onto. On a separate note, one of the largest soybean growing groups in Argentina is predicting that due to the governmental situation and lack of access to financing that country could plant up to 1 million hectares (2.47 million acres) fewer than predicted this year.

Progress with bean harvest was about as expected as the report tells us we are just beyond the halfway point at 53% complete. This is 13% behind the 5-year average but with the current outlook we should make tremendous headway this coming week.

Export inspection set another new high for the marketing year as we loaded 73.2 million bushels, easily 50% above trade expectations. This brings the year to date shipments up to 218.36 million bushels, which is 24% higher than last year. To reach the targeted 1.7 billion the weekly average now needs to be 32.9 million.

As with corn and wheat, we could have potential to see prices chop around current values for a few more days but lacking additional positive news such as a change back to hot and dry in Brazil, I believe we will see price turn lower once again into November.

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Wheat

It would appear to be Tuesday undo action in the grain and soy trade this morning as the markets that closed weaker yesterday are higher and the visa versa. Realistically we are confronting a drought of news right now, especially for wheat.

Export inspections last week did improve ever so slightly as we loaded 17.7 million bushels. This was a bit below the 10-week average of 21.2 million and brings the marketing year to date tally up to 386.5 million bushels. While we remain pretty much on track to meet the USDA target of 925 million, this number is running over 30% behind a year ago.

We also learned yesterday that the winter wheat planting increased 8% bringing it to 76% complete, which is just a percent behind average. As you would suspect, the Midwestern states where corn and bean harvest have lagged the most are the farthest off the normal pace but of course Illinois and Indiana really do not account for a large percentage of the overall winter wheat acreage. Emergence stood at 56% compared with the normal 50%.

There is a pretty standard line up of tenders in the world market right now but unless we have some type of logistical or program advantage, bargains are to be had elsewhere. We may be able to hold this range for a few more days but I suspect prices will still try and track lower once again into early November.

Corn

The corn market was able to squeak out a little gain yesterday and surrendered an equal amount overnight. I guess you could make this argument that in face of ongoing harvest this is a positive signal but that may be trying to read too much in the overall picture right now.

The pace of harvest continues to run behind average and while the wet weather last week would explain part of that, we should not lose sight of the fact that large crops take longer to harvest as everything from combines to trucks to dryers and handling equipment as taxed more heavily. Additionally, I have spoken with several clients recently who have commented they have run into quite a bit of high moisture corn once again (30% ) and are electing to remain patient waiting for Mother Nature to provide more natural drying. According to NASS as of Sunday we had harvested 31% of the crop compared to a normal 53%. While I am sure there will be a scattered shower here and there that could create a hindrance, the forecast for the next 10-days looks near ideal to move ahead.

Export inspections were not the reason corn was able to stabilize yesterday as we slid in beneath expectations. We loaded 28.3 million bushels, which was below the lowest estimates as well as the 10-week average of 36 million. Marketing year to date we now stand at 224.14 million bushels and now need to average 33.9 million per week to reach the USDA target of 1.75 billion. While it is probably premature to make too many predictions about corn usage I am in the camp that believes the USDA is using pretty optimistic numbers for both domestic and export usage for this year. Part of the danger in that is if we see higher production estimates in later reports, there will be little room to absorb that with usage.

Without a bullish shot in the arm over the next day or so to stimulate more short covering, I suspect this market should roll over and head back south into the end of this month.

Soybeans

Although lower, the bean market did a reasonable job of bouncing from the lows into the close yesterday and we have tried to erase the losses themselves in the overnight hours. Considering most of the news at hand that is almost impressive but I will hold that judgment at least until the close today.

I believe the most supportive factor in beans right now has been the concerns over the weather situation in Brazil. Too wet in the south and too hot and dry in the middle and northern reaches but the latest forecasts appear to call for a shift in the pattern. Rains have now returned to the central areas and temperatures have dropped and over the next 10-days potentially heavy rains are expected. In additional to that, the south is supposed to begin drying out. While forecasts are forecasts, if accurate it would appear to leave little for the bulls to hang onto. On a separate note, one of the largest soybean growing groups in Argentina is predicting that due to the governmental situation and lack of access to financing that country could plant up to 1 million hectares (2.47 million acres) fewer than predicted this year.

Progress with bean harvest was about as expected as the report tells us we are just beyond the halfway point at 53% complete. This is 13% behind the 5-year average but with the current outlook we should make tremendous headway this coming week.

Export inspection set another new high for the marketing year as we loaded 73.2 million bushels, easily 50% above trade expectations. This brings the year to date shipments up to 218.36 million bushels, which is 24% higher than last year. To reach the targeted 1.7 billion the weekly average now needs to be 32.9 million.

As with corn and wheat, we could have potential to see prices chop around current values for a few more days but lacking additional positive news such as a change back to hot and dry in Brazil, I believe we will see price turn lower once again into November.

Have you ever been on a trip when the going has been frustratingly slow? Rough roads, detours, congested traffic, bad weather or any combination of the above just drags things out and it feels you just cannot get away where. Then, you stop for the night, get a great rest and when you come out in the morning, the sun is just rising, the air is crisp and it just feels like the drive will be smooth sailing ahead. That is kind of what markets feel like this morning. We have no major reports the obsess over this week, no country that I am aware of is on the verge of invading another and best of all, the weather appears to have cleared and the U.S. harvest should be shifting into high gear. Yes, there will be the inevitable bump road ahead but we will cross them when the time comes. Of course, it would also appear that this trip will be mostly downhill for at least the immediate future.

Wheat

The overall wheat specific news is very light this morning. The improved weather should allow planting of the winter crop to move ahead steadily and the trade will be looking for figures to come in between 75 and 80% complete this afternoon. Little of nothing lining up in the export side of things and while overseas markets have come away from lows, Europe and the Black Sea continue to maintain competitive advantages.

As noted last week, it appeared that much of the strength was generated by fund short covering and this morning little news to encourage any more. If correct, that should translate into back and fill action as we work at developing a base of support for this market.

Corn

While we still remain more than a dime above last week’s lows, the corn market has traded defensively overnight and there would appear to be little in the way that will provide support. Yes, there are a few showers predicted to pop up in various point around the Corn Belt in the next 10 days but as a whole it would appear that we have near ideal harvest weather now into November. The trade will be looking for completion to have reached 35 to 40% range on this afternoon’s report.

I have continued to hear reports of light test weight from many areas but if that has translated in disappointing yields in an entirely another question. The larger problems this could create for some will be the storability of the crop and demands good management of the inventory in the months ahead. I am generally not a proponent of long-term storage of corn and believe it is a tool that should used to capture basis/spread improvement not wait for price rallies, and that could be especially important this year.

The rally over the past couple weeks did push some long term indicators very close to the point of turning positive but as we know, close only counts with horseshoes and hand grenades. As I have stated previously, I believe the corn market is into the final stage of this bear move but there remains the possibility for a dip into lower lows in the days and weeks ahead. Regardless if new lows are in the mix or not, we should be dealing with an extended period of congestive type base building.

Soybeans

The bean market appears to be the favorite for the bear this morning, which is understandable in light of the morning news. The generally clear domestic forecast should enable harvest to quickly move forward. The trade will be expecting the completion number to have pushed to the 50% level by last Sunday and as bins begin to fill, the belief is beans will begin making their way to town.

While far from over, weather concerns in central and Northern Brazil have been somewhat alleviated as good rains are forecast for the next week to 10 days. Planting to date in those areas has remained behind normal with the state of Mato Grosso reporting only 9% complete but if the outlook is correct, farmers will move ahead as soon as fields are suitable again.

While the short-covering rebound in beans over the past few weeks was the best bounce we had seen since the spring, it still did not even reach a 10% reaction in prices and has done little to change the overall picture. I continue to believe we are headed down at least into the 9.00/8.80 price zone where November futures developed a base back in 2009 and 2010 with an outside possibility of yet seeing a push all the way down to the 2009 cycle lows just below the 8.00 mark.

There would be no question that the greatest market excitement, and by extension press coverage, centered on the very volatile equities trade this week, but I believe coming in a close second was the activity in crude oil. There is not a paper you could pick up that did not have at least some article about the falling prices of oil. And why not? This is a commodity that impacts each of us daily. Of course, as I have written many times before, when a story or topic becomes the news du jour, my contrarian radar begins to trigger alarms. This would seem to be a classic example as we have seen crude in a steady downtrend for the past four months, losing over 25% in value, and every story seems to treat the news like they just uncovered another cave containing additional dead sea scrolls. While I am not quite prepared to say we have pushed in a low just yet, it would appear this fruit is becoming pretty ripe.

Part of the surprise with this move for many has been the reaction by the world’s largest producer, Saudi Arabia. Previously they have cut production in an effort to support the price at the $100 mark, but have not with this current move. Before we look at possible reasons as to why this has changed, it might be more fun to first delve into the conspiracy theories as they are always more fun than dull old fundamental economic reasoning. The most prevalent espouses the belief that this is a joint plan between the United States and Saudi Arabia to put the squeeze on other countries: Most specifically Russia as economic punishment for its involvement in Ukraine but to also further push Iran into submission to the demands of the West. While this all sounds intriguing and certainly can be one of the impacts of lower prices, does anyone truly believe this administration and Congress have the organizational and planning skills to pull that off? They cannot even seem to put together a cohesive plan to deal with the threat of Ebola.

Another slightly more feasible theory is that Saudi Arabia has taken this laissez-faire attitude about prices not because they have embraced a new found appreciation of allowing the free market to work but rather just the opposite. This is more like the Chinese approach of flooding the market with an overabundance of product in an effort to drive out the competition. Not only have they often taken the brunt of cutbacks to try and control price in the past, you have all these other upstarts such as Russia, Brazil, a redeveloping Iraq, and worst of all the United States, threatening their dominance. It is of course the U.S. that could be as disconcerting as any as we are producing the most oil in over 45 years and are on course to overtake Saudi as the largest producer in the world. There is no question the current break is having a major impact on other OPEC nations. It is estimated that many have a “fiscal breakeven price”, the level at which oil needs to remain above to finance their government, anywhere from $82 and on up. This actually applies to Saudi Arabia as well, but with around $750 billion in sovereign wealth funds, they can weather the storm for some time. As far as it shutting down the booming US growth, it is my understanding that only 3% of shale production has a breakeven above $80 and with the improvements in technology much of it is dramatically lower than that. It could slow down the growth a touch but it would not appear by much even at current levels.

I am not going to claim that there is not a sliver of truth in the above theories but I have to believe the reality is much less suspicious in nature. The world economy has been slowing down while energy production has been growing which in the commodity world means excessive inventory and lower prices. Of course, that brings us back to the old line that the best cure for low prices is low prices. We very well could be reaching the point where that is taking effect and that is not even considering the potential boost lower energy cost could provide for countries like the U.S., Japan, China and the nations of the EU.

As I commented in the opening paragraph, when I see a topic evolve as the “hot” item, it always perks my interest. And of course it allows me another opportunity to quote Benjamin Franklin and say, “when everyone is thinking alike, then no one is thinking.” While there is no precise science to say we have reached the ultimate extreme, I have to believe we are moving close to that point in the petroleum trade. For our readers in production agriculture, it may be time to start considering the idea of locking in needs for next spring.

The world markets appear to be much more at ease this morning. Equity markets are higher once again, debt instrument are soft and so is the U.S. Dollar, all seemingly signs that those who wanted to reduce risk by unwinding positions have accomplished that goal. This is not to say that there could not be another catalyst that would send shivers down the spines of traders everywhere but without it we should be back to focusing on the fundamentals at hand.

Wheat

We appear to be struggling a bit here in morning trade but, the wheat market was able to extend into a slightly higher high yesterday and again overnight but still remain within our initial retracement target zone. While one has to imagine that much of the recent strength has been stimulated by short-covering, it does appear that world markets have begun to stabilize and even show improvements. As we have noted previously, the wet weather in southern Brazil has created quality issues as well slowed availability and there is talk that they are poking around for U.S. food grade wheat. It also appears that the European feed wheat market has stabilized and potentially found a low as prices have bounced over $10 tonne recently.

Exports sales did snap back from the dismal showing last week as we posted 454,000 MT or 16.7 million bushels. The main purchasers were Nigeria at 108.1k MT, Yemen at 97.3k MT and Japan for 85.1k MT. Year to date this brings total sales up to 529 million bushels, which is nearly 59% of the USDA target of 925 million. This means we will need to average 12 million per week moving ahead.

While I continue to believe that this corrective bounce will exhaust very soon, the recent action looks indicative of a market that has reached a bottom. Another dip lower to test support in November would appear to be in order.

Corn

Corn managed to climb back for a higher close yesterday and did carryon a bit higher overnight but the buy interest does appears to be waning thing morning. While wet weather and general market uncertainly did help corn this week but looking out over the next few weeks it would appear that at least one of these factors will become non-threatening, and of course that being weather. The west is already drying out and many I have spoken to in the central part of the country expect to have combines running full steam ahead by Sunday which should translate into a rapid finish for beans and on to corn.

While it did not seem to help price activity when released, export sales were excellent last week as we posted a new marketing year high. For the week ending 10/9 we sold 1.928 MMT or 75.7 million bushels. The weekly average for the year to date has been 27.8 million. Over half of these sales went to Mexico as they purchased 1.072 MMT, followed by Japan at 214.7k MT, and Venezuela for 124k MT. Year to date this brings sales back very close to the same as last year with a total of 678 million bushels. To reach the 1.75 billion bushels projection we will need to average 23.3 million per week.

I continue to believe that we should see prices swing back lower into the end of the month and could still poke into new lows but believe we have entered the bottoming stage of this down swing.

Soybeans

Along with corn, beans rebounded for the close yesterday and extended a bit higher overnight but appears to have run out of momentum now in the morning hours. Even with the strength though we could not reach back to the highs posted on Wednesday.

Part of the rebound this week has been stimulated by concerns about the dry weather conditions in central and Northern Brazil. I read that planting in both Mato Grasso and Northern Parana have come to a complete standstill due to the dry conditions. Moisture is forecast to move in this coming week but of course with any forecast, there is certainly no guarantee. As we know dry weather tends to begat dry weather and they probably need a major event to break the pattern.

Exports sales were solid and consistent with last week coming in at 935,000 MT or 34.4 million bushels. This actually was behind the average weekly pace for the marketing year, which stands right at 50 million. Even though China appears to be active in the South American market right now, they still accounted for the majority of our sales taking 709.4k MT followed by Taiwan at 77.1k MT and then Germany for 75.5k MT. Year to date we have sold a total of 1.125 billion bushels which is 66% of the targeted 1.7 billion.

Coming into the harvest with a depleted pipeline has helped absorb the earliest onslaught of harvest but I suspect on the next week to 10 days the market should find ample quantity of beans moving in. Accordingly, I continue to believe we have room to at least push down into the 9.00/8.80 zone between now and Thanksgiving.

The past week to 10-days has been a period of realignment across a pretty wide spectrum of markets. Those which had been semi positive such as the equity trade have witnessed a washout lower, those that had been trending consistently lower such as grains and soybeans experienced a rebound and others that are sensitive to world economic woes and concerns have extended downward spirals such as the petroleum markets. Note that through this same period you have seen some advance in gold but more specifically a solid rally in bonds, notes and other government back debt securities, which would suggest we have been looking at a flight to safety and not some underlying shift in the fundamental story. Take risk off the table and sit in the relative security of clipping coupons in a government-backed investment. Then to make things even more interesting there was a mini “flash crash” in the bond market yesterday for a time giving the impression that no one was safe.

The rationale behind this move could be coming from a number of different angles. We have reached the 4th quarter where economic activity outside of retail sales can slow. Concerns about what has already been a slow down in developing economies including China and a potential recession in the EU. Uncertainly about the U.S. becoming more embroiled in another war in the Middle East and even the concerns about the now two Ebola cases with healthcare workers in the United States. Alone, none of these factors should create much of a market reaction but cumulative, they appear to be enough to have sent traders and investors racing into a “risk off” mode and the sidelines.

While there is nothing to say there are not more surprises to come as that is almost certain to be the case but, we need to keep in perspective that once the traders have balanced out their respective portfolios, we will return to trading the fundamentals at hand and for those of us dealing with production agriculture, they do not look terribly favorable for the immediate future.

Wheat

Exports sales have been pushed back to tomorrow morning due to the Monday holiday, which leaves little other news for the wheat market this morning. Current weather forecasts indicate that moisture will have pushed off to the east over the next few days and the 10-dayt outlook into November looks dry and should allow planting of winter wheat to wind down quickly. Granted, we have no idea of what the winter holds in store for us but this crop appears to be getting off to a solid start. Likewise for Europe and into Russia.

That of course leaves the production in the Southern hemisphere but there do not appear to be any glaring issues in Australia and we already know the Brazilian crop is suffering from quality issues do to excessive moisture.

I continue to believe that the worst should be behind us in the wheat market at this point but without a new and surprise development; we will likely be looking at an extended congestion pattern.

Corn

While not a complete washout, it would appear that the short-covering rebound in corn ran its course yesterday. There remains a possibility that we could chop around current levels for a few more days but with the weather forecasts predicting clears skies ahead for much of the Corn Belt now into November, harvest mentality and hedge pressure should return.

The FSA did release revised numbers again yesterday and did bump up corn 370,000 acres compared to their previous estimate. While there is no perfect way to correlate this against the NASS numbers, it would appear to still be well short of the their figures. As such it will continue to be a point of discussion/debate for some but far less of one seeing that NASS cut acres on the recent report.

All government reports have been pushed back a day this week, which means the EIA ethanol production will be released later this morning and export sales tomorrow morning. Outside of that, the biggest influence today will likely be outside markets and none of them are acting too cheery. Equities are sharply lower, crude oil is down with spot futures pushing through $80 for the first time since June of 2012 and even metals are lower.

I continue to believe the corn market has moved into the bottoming stage but that can drag on for weeks to months and there remains a possibility for a stab into lower lows yet ahead. The rally this week should have provided an opportunity for those with unsold bushels to take advantage of the carry provided and shift your risk to someone else as well.

Soybeans

Beans have bounced back a bit this morning but the reaction lower yesterday took away the bull story for a possibly technical reversal. I understand funds ending up selling around 9,000 contracts yesterday, which would seem to suggest this advance has exhausted.

We did have the September NOPA crush report released yesterday and while not a shocker came in at a disappointing 99.97 million bushels. Granted, everyone knew that bean availability was scarce before harvest began but this was the lowest monthly crush number in over a decade. The concern of course is when you fall this far behind in the first month of the marketing year; it could be difficult to catch up to reach the USDA target of 1.77 billion bushels.

With the weather forecast to clear up we should see bean harvest kick into high gear over into the weekend. As such, it is difficult to believe that we will not see the return of both hedge and spec selling. Unlike corn, the fundamentals in beans look so overwhelmingly bearish I have to believe we have yet to find a low in this market. While a trip sub-$8 could be questionable, I continue to believe we will see nearby futures below $9 before finding a low.

Bears were on the run once again yesterday and while this sent the corn and bean markets to the highest levels traded in the past five to six weeks, wheat just edged up to challenge the highs posted last week. This would seem like a little more sensible reaction to the news at hand particularly considering there are no harvest delays to create anxiety for the short here.

Planting of the winter crop remain on pace as another 12% went into the soil over the last week bringing us up to 68% planted. This is actually 1% ahead of normal. Emergence is now at 43%, which is 6% ahead of normal.

Possibly one of the limiting factors for wheat yesterday was a poor showing in the export inspections. It is not surprising to see more capacity devoted to corn and beans as new product is available but the 15.6 million bushels loaded were well below expectations and the lowest number seen in over 10-weeks. The 10-week average is 21.8. Possibly making this even a bit more psychologically disappointing was the fact that the USDA boosted the export projection 25 million last week. All that said, year to date we have loaded 367.27 million bushels and to reach the 925 million target we will need to average just 16.9 million per week moving forward.

Prices are trading a bit defensively overnight but bulls have not surrendered much ground just yet. I suspect this bounce should be completed by the end of this week and we will see prices drift back lower into November.

Corn

I am not sure if corn was feeding off beans or if it was the other way around but we posted a 2nd day of solid strength. Shorts evidently have gotten skittish over the recent rains and the slower than normal pace of harvest but if the current weather forecasts are correct, it may be difficult to get much more life from that concern. After the current rains have moved east after mid-week, the next two weeks forecast appears to be rather conducive for harvest. Lets keep in perspective as well that larger crops take longer to harvest so we should never look at an above average pace.

As of this past weekend the USDA reports that harvest had reached 24% complete which was up just 7% for the week. This leaves us 19% behind the average pace. Corn mature has almost caught up to average at 87% and really becomes a moot point moving forward.

The was some additional nervousness in the trade over the fact that the FSA is scheduled to release updated acreage number again today and of course, there has been an ongoing debate about this since the last release. While the number they publish today could reignite the discussion I am going to suggest that the 700k cut that the USDA made last week is going to be their only change at least until January.

Export inspections were solid but not stellar coming in at 36.8 million bushels. This was right on top of the 10-week average of 36.6 and brings the year to date total up to 195.7 million bushels, which is 68% ahead of the same time last year. To reach the USDA target of 1.75 billion bushels we need to now average 33.8 million per week.

We have 75% of the corn crop yet to come home and unless one believes that the wet weather will continue to plague us for the next four to six weeks it would seem unlikely that we can continue to hold this strength. As I have commented several times recently, I do believe the corn market is in the final stages of this bear move but even then, I am looking for weeks if not months of congestive trade. I continue to believe producers should take advantage of the carry this market offers and should be making sales in deferred contracts. Additionally, the bounce has pushed the 2015 December corn above the 4.00 level and into the zone we are looking to make sales for next year.

Soybeans

It would appear that the bean short has gotten their shorts twisted pretty tightly and tried to get out of them now over the past two sessions. As I commented yesterday the Chinese hedge activity locking in crush margins took everyone by a bit of surprise when they returned to the markets this week and combined with the recent bout of wet weather it appears to have provided enough fuel to keep pushing the market into buy stops. While technically this has opened the door for the possibility of a little more gain, fundamentally it looks as if it will be a challenge to keep carrying that torch.

I suspect everyone was a bit surprised to see that harvest had jumped 20% over the past week bringing us to 40% complete. I suspect there were a few acres missed in the previous weeks report and we are still 13% behind the average pace. Some may argue that at 40% complete it is positive that we have not seen more beans flood into the pipeline but I would contend that is fairly normal. Beans are a much easier crop to keep on the farm. On top of that, the obvious is that we still have 60% of the harvest to bring home. I drove 200 miles south in Illinois yesterday afternoon and would say that the 29% completion for this state looks pretty accurate.

As more and more beans have made it into the pipeline, the export shipment pace has picked up and last week we loaded 52.5 million bushels. The ten-week average is only 16 million and with this number the year to date tally is up to 144 million bushels. To reach the 1.7 billion target we will need to average 33.8 million per week moving forward.

Prices are soft in the overnight trade but by no means have the bulls capitulated. I have commented previously that there is a possibility that beans could extend to complete a 10% advance which would carry us into the 9.85 to 10.00 level but believe whatever the correction turns out to be, it should be completed by this weekend.

Yesterday turned into one of those unusual sessions where there was really nothing independently that would seem to warrant much of a rally but lots of little things added together were enough to send prices higher and begin touching off buy stops along the way. Beans certainly witnessed the most fireworks but corn and wheat did not perform too shabbily either.

South Korea passed on a couple tenders of wheat and there does not appear to be much else in the lineup for now. The Monday government reports will be issued today and the trade will be looking for the winter wheat planting to have pushed beyond the 70% complete mark with emergence over 40%.

Macros are a bit more mixed this morning as we have metal higher, energies lower and the dollar higher. Outside of this news is fairly light for the wheat trade.

December futures should continue to find stiff resistance between 5.10/5.14 and even if we could poke through that mark, I would not expect much more that a bump up to the 5.20 level. While I do believe there are good odds that we have a low in place for wheat, I also continue to believe we are in store for an extended sideways pattern in the days and weeks ahead.

Corn

Solid strength over in corn as well yesterday and with the overnight strength, we have been able to poke up to complete a 50% retracement at 3.49 ½. Bulls appear to be holding the line so far this morning but I suspect without another element of positive news this 3.50 mark is going to be really difficult to push through.

As I commented yesterday, I believe we are basically at what should be the low end of corn market but that does not mean we should be able to sustain extended rallies nor does it mean that cannot push into lower lows in the weeks ahead. There is just too much harvest in front of us and while wet weather has put a damper on activities this week, the forecasts appears to improve beyond Wednesday. Bottoms in the corn market are generally characterized by extended sideways base building.

Cordonnier released updated estimates and pushed his yield a bit higher to 175 b/p/a. This is of course higher than the number the USDA printed last week but not significantly. The trade is looking for harvest to have reached the 25 to 30% complete mark on this afternoons update.

Corn planting in Argentina has reached 24.5% complete according to the Buenos Aires Cereal Exchange, which is over double the pace of a year ago. In another interesting story I read overnight it sounds as if the Argentine government is becoming a bit impatient with farmers as they continue to hold last years crops. Who can blame the farmer as the Peso is virtually worthless and the domestic inflation rate projected to rise over 30% this year, holding a real asset would appear to be a better choice than a fiat currency. Of course the government looks to exports as a major source of tax revenue, which is not flowing into their coffers. There are reports that “vandals” have been cutting open grain storage bags but have not stolen anything. Of course once that happens, the grain is left to the elements and at risk of damage. I guess that is one way to provide incentive to sell.

As I commented previously, I expect this current strength to fade fairly quickly, particularly once we see harvest kick into gear once again. There still remains potential to see December futures take a run for the 3.00 level over the next 30 days but I would expect to see a few bottom pickers begin to emerge on the next swing lower.

Soybeans

The biggest action over the past 24 hours has certainly been in the bean market as we have now pushed up and through the gap and key overhead resistance at the 9.56 level. Closing above that point could open the door for a quick run up to the 9.85 to 10.00 range.

It would appear that this market was supported by not only the wet weather delaying planting but also by trade activity from China. That country was on holiday last week and as they returned this week there was a need to purchase beans as a hedge to lock in crush margins for meal, which in turn has pushed prices into stops and continued to accelerate the move. While it does not appear that we have finished the job quite yet, there is also a limit to how much buying such a maneuver can generate. It is interesting to note that on the recent strength both corn and wheat posted 10% rallies while beans had only moved a little over 5%. A 10% rally in November futures would actually carry us up to 9.94. There is nothing that say we have to rally the same percentage but it cannot yet be discounted either.

Cordonnier also released an updated bean yield placing it at 47.5. As with corn this was a bump higher but not a significant change. This is 4/10th higher than the USDA. The trade will be looking for harvest to have reached the 30 to 35% range on this afternoons report but more emphasis is likely to be given to the weather outlook. If the current forecast remain unchanged we should be back into full harvest swing by the weekend and I suspect that would deflate the air in the bull balloon rather quickly.

Very uneventful trade as we begin this new week with two-sided action overnight in the wheat market. U.S. government offices are closed today so all export news and other updates will be pushed back until tomorrow. We have a mixed bag in the macros as energies continue to dive into lower lows but we have the metals trading higher and the U.S. dollar lower.

With the October report now behind us and a mildly pleasant surprise with the lowered ending stocks, we should see the wheat market move into a sideways pattern. We have to keep in perspective that at 654 million bushels, we have still increased ending stocks by over 60 million from last year but the fact that the trade was expecting the number to climb over 700 million takes away a little of the bear ammunition.

Also a pleasant surprise was the fact that the USDA cut the world ending stocks by 3.79 MMT to 192.59 MMT and this after a net increase in world production of just over 1 MMT. Keep in perspective though that they elected to leave the Russia crop estimate unchanged at 59 MMT and many private estimates have this climbing above 60 and even 61 MMT. Keep in perspective though that this is still and increase of over 6 MMT from last year and is the largest carryout since the 2011/12-crop year.

The best part of all of this is that the supply side of the equation should be factored in the current values so focus should be on demand. Granted, to date most of that the business has been directed towards the Black Sea and Europe but we should begin seeing that shift back to the U.S. in the months ahead. For the time being though, I anticipate we will be looking at sideways price action.

Corn

We appear to have a void of news for the corn market as well this morning but we have seen a little buying materialize once the day session began. Part of this could be a balancing out from the breakdown that was witnessed on Friday.

While the numbers released on Friday we not quite as burdensome as the trade was anticipating, as expected the general assumption was just wait until next month as they will be larger once again. While that very well could be the case, as I discussed in the weekly letter I have heard more and more reports from the Northern reaches of the corn belt indicating that light test weights have been common and yields basically average. If that turns out to be the case, we may not see the overall production numbers grow significantly from here. That would not change the picture from bearish to bullish but it would potentially break the supply mentality. Note that last Friday Conab forecast that corn acreage in Brazil will be down 4.7% so we are already seeing signs that the downward spiral in price is having an impact on future supply.

With 80% of the harvest still in front of us I remain in the camp that believes we can still see the corn market press into lower lows and challenge the 2008/2009 bottoms but even if that were the case, we are only talking about 10% move from current values. I have to be cautious on how to word this but if we are within 10% of a low, we are basically at the bottom. That said, lows in the corn market are generally accomplished through an extended sideways pattern and we have not even seen the beginning of that occurring just yet. Ideally beginning from the end of this month through the balance of the year, that is the type of action that should unfold. For producers though keep in perspective that we have solid carry in the market and once we have moved past the harvest gut slot, that should begin to erode. The only way to take advantage of that is to sell the deferred contracts.

Soybeans

The bean market has been able to shake off a little of the negative trade from Friday but with limited success so far. I do not mean to sound redundant but even though the numbers released by the USDA were lower than expectations and carryout was cut 25 million bushels, there is really nothing positive that can be said about the picture in beans right now.

We will not see weekly updates until tomorrow but the trade will be looking for harvest completion to move up to the 35 to 40% range. The south has been wet and showers did slow up Midwestern activity over the weekend but the forecast appear to clear from the middle of this week forward. Over the weekend I traveled almost 700 miles over three states and as you would suspect, combines were in full force everywhere.

Last Friday the USDA was not the only agency releasing crop reports as Conab also published projections for Brazilian production. Granted they issued a range of estimate but forecast the bean crop will be somewhere between 3.2 and 7.3% larger than last year. With the acreage they are using this would equate to production somewhere between 88.8 and 92.4 MMT. Granted with the crop still in the early planting stages there is no guarantee we will see those numbers but they appear conservative compared to private estimates and the USDA.

I have to suspect that once the weather has cleared and harvest kicks into full swing that the current strength in the bean market will quickly evaporate. I continue to look for a push down at least into the 9.00/8.80 zone and if yields continue to perform as the early reports, a trip down to the 8.00/7.80 range is not out of the question.

With mid-term elections less than a month away, many incumbents must be feeling relatively confident in their chances for re-election. It is not that economics are the only gauge that voters use when they step in the booth, but it is a critical one and right now the most current releases and trends have been positive. If everything, at least on the surface, appears to be moving the in the right direction, who wants to change the crew of the ship and risk steering off course again? Seems like a reasonable assumption. Unemployment has been steadily moving lower since December 2009, dipping last month below the 6% level for the first time since July of 2008. While not at a stellar pace, GDP is growing and by golly, the people in Washington must have learned how to get along as there has not been a shutdown of government services now in almost a full year! Then to top it all off, we learn that the deficit has continued to fall and is down 66% since the peak in 2009. Back in 2008/2009, there were many Cassandras who were prophesying about how the western world was on the verge of collapsing into a debt-ridden pile of rubble. To some, those prophesiers have now been reduced to nothing more than 21st century alarmists. Unfortunately, that line of reasoning is specious at best.

As I have written about in previous letters, when the economy went into a tailspin in late 2008 and into 2009, the Treasury and the Federal Reserve stepped up and enacted a number of extraordinary measures to first keep the financial system from seizing and then continued to pump money into the system in an effort to reinvigorate a morbid economy. While unpopular with many, it was the right medicine to treat the symptoms with which they were confronted. Now five years on, we can look back and declare the program was successful in many respects. I continue to believe that we were fortunate to have the trio of Hank Paulson, Ben Bernanke and Timothy Geithner at the helm of the financial departments as they understood that “extraordinary times demand extraordinary measures” and were not mired in the belief that there is only one economic theory that applies to all circumstances. Evidently Hank Greenberg would disagree with this sentiment.

Regardless, the politicians and political parties who are vying for your votes right now really want to stress the improvements that we have witnessed under their watch and love to lift up all the above mentioned improvements. And why not? We would be blaming them if things went the other way. That said, the story that they do not want think about is that the problems that this country will face in the years ahead are structural and so far we have only been treating symptoms, not the disease.

When you look at the graph of the federal deficit, it does appear encouraging to see the spending deficit shrink now over the past couple years, certainly due to the pickup in economic activity but also due to the fact that the stimulus spending is winding down. The point to keep in perspective is that we have just borrowed less each year for the past couple years, and at a negative $486 billion projected for 2014, we are not even back to the pre-recession record set in 2004 at a negative $412 billion. In reality, we have only witnessed a brief four-year period, 1998 to 2001, in which we did not record deficit spending dating back to the mid-1970’s. As we know, that deficit equates to an ever rising federal debt. Even more concerning is the fact that according to the Congressional Budget Office, soon after 2015, the annual deficits will begin heading back in the other direction and, under the most optimistic model, will be back above $1 trillion by 2024/202 at best and worse by 2020/2021. In all scenarios, this means that the level of debt as a percentage of GDP will continue to rise to ever higher levels, further stifling growth and ultimately leading to a number of other issues such as the value of the dollar, inflation and the ability of the US government to service debt.

So, when you hear a politician or a political party brag about how much better things are due to their astute service and foresight at some level or another, keep the real numbers in perspective. Be it 2014, 2016 or 2020, the United States is going to be forced to confront some very difficult decisions that will involve structural changes in tax and spending reform, particularly with entitlement programs. The question will be, are there any on the ballot who are really qualified to tackle those fundamental issues? It is something to consider when you step up to cast your votes.

I would like to say I have something really insightful to say before the USDA releases the October crop production report later this morning but unfortunately that is not the case. As we know, corn, wheat, beans and related products have all posting the stoutest rallies witnessed in a couple months leading up to this point as evidently bears were becoming uncomfortable after being in control for so long. I have searched and searched for something lurking below the surface that would provide rationale for the rally but keep coming up empty handed. More often than not, other than the fact that we were very oversold technically and susceptible to a rebound, the biggest reason cited for the bounce was concern that the USDA would lower the harvested acreage number. As I have discussed times before, that possibility exists but I suspect anything significant will not occur until the final production numbers in January. If that is correct, the reports today can only offer us varying degrees of bearishness. We only need wait a few hours to find out if that is correct and we should return to trading on the news at hand, primarily harvest activity of which the majority still lays in front of us. The average estimates stand at;

While the bears in the corn market continue re-adjust their positions in front of the October crop production report, they appear to have the job complete in wheat for now. Realistically, there should not be any changes of significance for this commodity and any bushels reduced or added in one country should be pretty well balanced out in another. That said, after posting a 10% rally here over the last couple weeks, I suspect we would need something positive to maintain these values.

Assistance certainly did not come in the form of export sales. For the week ending 10/2 we sold only 372,400 MT or 13.7 million bushels of wheat, which was down 50% from last week. This figure was below even the lowest estimates. The main purchasers were the Philippines for 101k MT, Taiwan at 66.3k MT and Egypt, which was a switch from Nigeria for 55k MT.

For now we remain patient to wait and see if Uncle Sam has any surprises in store.

Corn

The corn short continues move to the exists as we now posted another higher high for the advance and could record the 6th higher close in a row. While there could be something else lurking below the surface, I have to believe that unless we find a positive surprise in the reports tomorrow it will be very challenging to keep the optimism rolling.

The weekly ethanol report issued yesterday did show an improvement last week as we produced 264,894,000 gallons up from 259 million the previous week, but this is still lagging the pace we need to meet USDA projections. This should have eaten up approximately 95 million bushels of corn. Ethanol stocks were down 7 million. Keep in perspective as well that the rally in corn this week did not help margins either.

We did see a little pickup in the export sales though as we sold 784,800 MT or 30.9 million bushels. This brings year to date sales up to 602.3 million bushels which is lagging the same period last year. The thing to keep in perspective there is that last year did not start out with a bang. The best purchasers were unknown destinations for 230.4K MT, Japan at 168.0k MT and Peru for 157.3k MT.

December corn has now moved very close to completing a 50% retracement of the last slide at 3.49 ½ and I suspect has the pre-report rebalancing complete. It would seem we will need something pretty positive tomorrow to extend higher. Keep in perspective; a negative surprise could set us up for a trip into new lows yet this month as well. The average guesses for tomorrow have the corn yield at 174.7, production of 14.523 billion and carryout of 2.144.

Soybeans

I have yet to see anything printed but Conab is supposed to issued updated crop estimates for Brazil this morning so we have two production reports to digest this week. Reviewing the estimates for tomorrow I have the average guess for yield at 47.6, production at 3.977 billion and ending stocks at 478 million. Most everything else in between will be pushed off the stage until that time.

Overall the weather picture is looking solid for great progress in the week ahead and if what I witnessed across Northern Illinois in the last 24 hours is representative, this bean crop will be harvested quickly. I am headed across Iowa tomorrow and look forward to seeing the progress across 80.

Export sales were solid at 923,500 MT or 33.9 million bushels. Year to date we have now sold 1.09 billion bushels, which outstrips the same time last year by 83 million. To reach the USDA target of 1.8 billion we need only sell on average 12.9 million each week. The biggest concern here is that China remains the dominant purchaser.

For now, we have to remain patient until 11:00 CST tomorrow and see if Uncle Sam has any surprise in store for us.

Once again we have witnessed first hand what can happen when the boat is listing too hard to one side and it tries to right itself. Coming into the week, funds were holding a record short position in the wheat market with nothing really fresh for the bear to feast on. With reports looming ahead on Friday, a slight pickup in demand and a reversal in some macros, mainly the dollar, there was a rush to get back to the middle of the boat. The net result so far has been a rally back to the highest levels in a month. While I suspect we could have a little more room to the upside I would expect to see this initial rally fail within the next few days but as I have been commenting recently, wheat has probably absorbed the lions share of negative news and I believe we should have the worst of the down swing behind us. That said, it would also seem premature to look for an extended advance just yet or naive to think that we could not work back lower to revisit the lows. Traditionally grain markets peak with a spike and then boor you to death with sideways action at lows.

Adding a little extra incentive for the bounce has been the weather in Southern Brazil. While there have been some concerns about the dry conditions in the central part of that country, in the south where most of the wheat is grown continues to have just the opposite issue. In the state of Rio Grande do Sul it is estimated that 55% of the crop in the filling stage and with persistent rain, there are serious concerns about problems with gibberella and rice blast effecting both quality and yield. We shall see what Conab thinks about this soon, as their next crop estimate will be on the 9th.

While we have reached very close to the low end in the overnight trade, I believe December futures have room to reach into the 5.14 to 5.28 retracement zone on this bounce but believe that will cap off the extent of the rally for the foreseeable future.

Corn

Shorts continued to head for the exit in the corn market as well yesterday as we reached up to levels last traded in mid-September. If they were stepping out by choice, wanting to bank some profits before the report or were being taken out by stops matters little, it has provided us with one of the best bounces since prices turned lower last spring. While I do believe the corn market is in the last stages of this bear trend, with the majority of the harvest in front of us I have to remain the camp that believes we have not witnessed our lows just yet.

Many of the stories I have seen over the past couple days can talk about the slow start of the harvest and the frosty temperatures over the weekend prompting the rally and while I would not deny they have contributed to the buying, I do not believe they are the reason. I suspect we just reached a point where there short was not seeing equity continuing to increase and wanted to reduce risk. Of course many people like to hear concrete reasons so it is more convenient to give them one. Saying that there was more buying interest than selling interest leases too much uncertainty but there are some days when that is the case.

While not a market moving piece of news, I read an interesting blurb last night out of Argentina. While I am not sure if I can say that the government in that country is the most inept, inefficient and corrupt, it has to make onto the top 10 list as they teeter on the edge of insolvency and default once again. They have now come up with another brilliant idea to make the Ag trade even more convoluted. Evidently the government will be creating a new company specifically to compete with Cargill, ADM Dreyfus and whoever else is in the grain business there. While I am not sure where they will have the physical facilities I understand that this new endeavor will only pay the government an export tax between 5 and 10% while the other grain firms will continue to pay the current 35% tax. While it is difficult to imagine how this venture may succeed, I suspect if they move ahead with the plan, it can only be a positive for US Ag.

I suspect the trade for the balance of the week will be dominated by pre-report position squaring. The most recent survey was released by the Wall Street Journal, which is the one we participate in, and is very close to the previous trade estimates. The average yield estimate is 174.7 with a range of 172.3 to 178.1. The average production number is 14.523 billion and carryout at 2.144 billion

Soybeans

While we did not exactly collapse, after reaching to higher highs for the bounce early yesterday this market struggled to hold it’s head above water late in the day. It is estimated that funds bought around 4000 contracts. We have bounced a bit again overnight but it would appear without anything additional to spook the short, we should have our pre-report correction out of the way.

It would appear that we have a pretty clear weather forecast through the balance of this week, which should allow harvest to kick into high gear in many areas. Beyond that time frame though there appears to be a little disagreement as to how much if any moisture is headed back to the Midwest. The US model calls for little. Realistically, weather delays would appear to be one of the few possible supportive factors in beans and even then, I suspect only temporary. When you look at the overall picture in the bean market right now, it is difficult to be anything but negative.

According to the Wall Street Journal Survey the average estimate for yield is 47.6. The average production estimate stands at 3.977 billion and projected carryout at 478 million. We shall have to remain patient between now and then.

Due to early morning travel, the daily comments will be slightly abbreviated this morning.

Wheat

Although wheat was unable to hold the early strength, prices were able to fight back late to close a bit higher for the day. While that may sound like a pretty minor victory, it is something we have not been able to accomplish with much consistency recently.

Spring wheat harvest did move forward another 12% to 86% complete but is still 6% behind the 5-year average for this date. Winter wheat planted moved forward 13% to reach 25% complete moving a few point ahead of the average pace.

Export inspections slipped back below the 20 million bushels mark this week coming in right in the middle of expectations at 18.6 million. Year to date we have now loaded 303.97 million bushels meaning we need to average 17.3 million per week to reach the USDA target of 925 million.

We are trying to maintain a little strength now in the early evening trade but nothing that is sending fear into the hearts of the bears. If we can at least hold stable for the close, we should see prices track sideways to possibly even a bit higher through the end of the month.

Corn

The corn market was not able to quite make it back to positive territory for the close yesterday but we did fight back to at least close towards the high end of the range. As insignificant as that may sound, considering that the only positive news that can be found is continued discussion/debate concerning possible acreage adjustments on futures reports, which is anything but assured, and a slightly positive export inspection, it is a victory of sorts for any remaining bulls.

For the week ending September 18th we loaded 40.1 million bushels, which was a solid 5 million above the upper end of estimates. We are of course very early in this marketing year and have loaded 98.6 million bushels, which is just over double the quantity that loaded a year ago at this time.

Corn dented is up to 90% but corn mature still lags the normal for this date by 12% and stands at 42%. Harvest overall is slow in starting showing us 7% complete versus a normal 15%. Texas was only able to gain 7% last week taking it to 67% complete but North Carolina moved ahead 12% reaching 64% complete and Tennessee gained 17% and has reached 37%.

As I commented initially, the acreage discrepancy debate continues and I suspect will continue between now and the October crop production estimate. I would be surprised if the USDA actually made any adjustments on that report but the uncertainty could be enough to keep prices in a state of limbo between now and then.

Soybeans

The heaviest selling was reserved for the bean market on Monday as prices gapped lower and were never able to recover. With what appears to be a near perfect weather outlook to kick harvest into gear, buyers would appear to have little reason to become anxious.

Beans dropping leaves has reached 45%, still lagging the average for this date of 53% but with above average temperature in the forecast, we should see this number move up quickly. This is the first week that the USDA reports nationwide harvest and as of the 21st we have 3% complete, which is 5% behind the normal for this date.

One of the positive effects of harvest getting underway is that product is finally available once again and this was reflected in the export inspections. We loaded 17.2 million bushels, nearly double the previous week and over 3 times greater than the 10-week average.

Prices have been able to sustain a little rebound strength through the evening hours but this may be little more than a Tuesday undo bounce. There is less of a discrepancy in the bean acreage number than in corn but there is one nevertheless which could keep the bares at bay for now.

The wheat market stands out as the lone wolf here this morning as it is the only grain or soy market that is not under pressure. Chicago, KC and Minneapolis are all showing slight gains for the overnight trade. While a couple cent bounce may not amount to much in the overall scheme of things, we realistically have harvest behind us and it is difficult to continue pressing a market on supply once it is known.

While psychologically the corn and bean harvest should act like an anchor pulling against the wheat market, its biggest obstacle remains the world competition. We are finally competitive with Russian wheat but EU/French wheat remains at a solid discount so unless we have some type of distinct freight advantage this keeps us out of the trade picture. All that said, Egypt did purchase 55k MT of US wheat for late October. Over the weekend Russia reported that for the marketing year, which began July 1st, they have exported 26% more grain that the previous year or which 87% is wheat.

Not that it is a big market influence, on their release on Friday Informa projected that the 2015 US wheat acreage would potentially increase 509,000 acres above current USDA numbers. This would equate to 57.009 million acres and would be the highest total acreage since 2008 if correct.

As they old saying goes, the journey of a thousand miles begins with one step and for wheat we should be close to at least begin taking steps on level ground.

Corn

With clear skies ahead the trade is expecting the corn harvest to kick into a higher gear and we have begun the week with a dip into lower lows. The trade is expecting the report this afternoon to show harvest to date in the 12% to 15% complete range. Recognizing that is really a small percentage and remain behind normal, yield reports have continued to be outstanding.

As expected, it has not produced any market reaction but the Informa acreage estimates on Friday were interesting. They currently project we will plant 4.325 million acres less corn that the existing USDA estimate for 2014 with a total of 87.275 million. If correct, this would be the lowest planted acreage since 2008. They also adjusted down their assessment for the 2014 crop reflecting the recent FSA number estimating a planted number of 89.309 million compared with the USDA figure of 91.6 million. As I commented in the weekly newsletter, we need to keep in the back our minds the potential for acreage adjustments for 2014, particularly post harvest if the USDA/NASS have not made any changes prior to that. Yield is the name of the game right now and there are some even projecting a figure north of 180 but IF there were eventually an acreage cut, it could be that ending stocks will not climb significantly above current projections.

I continue to believe that December corn has potential to head down and revisit the 2009 cycle lows that sit right at the 3.00 mark and the way we have begun this week, that could happen by early October. While there is nothing etched in stone just yet, we have not seen a corn ending stocks figure north of 2 billion since the 2004/05 crop year but when viewed as a stock to usage ratio, supplies are nowhere near as burdensome as that period and actually line up about the same as 2009/2010, the last time we traded prices into this range.

Soybeans

Beans have taken the harshest hit of any this morning with November below 9.50 for the first time since July 9th 2010. Back at that time, we developed a base roughly between 9.50 and 8.90 that we traded within for around three months. With a clear forecast for the week ahead and consistently solid early yield reports, it would appear the bean market has little to provide support. The trade is looking for harvest progress to stand between 2 and 5% complete.

As with the corn, there were several interesting notes from the Informa acreage estimate and it provides us with a base for discussion moving ahead. First and foremost, they are calling for planted acreage in 2015 to reach 87.652 million acres. If correct, this would be the first time ever in this country that we would plant more beans than corn. I remember 20 years or so ago there was discussion that North America was going to evolve in to the corn hemisphere while South America would produce all the beans. Granted, South America has certainly stepped up the production but evidently North American producers did not get the memo. Hence the danger of making long-term projections. Depending on what number you use for this year, either the current USDA estimate of 84.8 million or Informa’s adjusted 83.66, this would mean bean acreage in the United States could climb either 2.85 or 3.99 million next year. In either case, the change is huge.

Adding to the potential bearishness of the potential US beans acreage are the recent numbers from Brazil. The early beans are already going into the ground and Conab currently estimates that total acreage will be up 5% this year with a potential to produce a total crop of 95 MMT. This compares with 86.7 MMT produced this last year. Of course we all know that planting a crop does not assure great production but if the US sticks in an additional 3% on top of record acreage and Brazil pushes acreage up 5%, we have quite a buffer against weather issues.

The slide would appear to be well greased at this point and with the majority of the harvest ahead of us, it would appear that bears are well in control of the bean market for now.

In keeping with my last few letters, I would like to continue to focus on the recent bullish activity in the U. S. Dollar alongside the related bearish patterns for commodities in general. As noted last week, we have seen commodity indexes push to the lowest levels in a year, heavily influenced by weaker prices in energies, and of course we in agriculture are painfully aware of the fact that prices for row crops are sitting at the lowest levels in over four years. There is another specific commodity that seems to have been in the news quite a bit that I would like to focus on this week; GOLD.

Those of you who have read my letter for any number of years know that I am not a gold bug. This is not to say that I do not understand that gold has value. It is durable, is widely used in electronics, dentistry and of course in the jewelry industry. For millennia it has been used as a currency or held up as a treasure, but history is littered with stories of those who are blinded by its allure. King Midas, the search for El Dorado and even the Leprechauns at the end of the rainbow are all myths or legends that should warn us of the dangers of lusting after this metal and that even possessing all that our hearts may desire is just as apt to bring us sorrow as joy. I came into the commodity business just ahead of the inflation driven gold rally in 1979 and 1980. I witnessed first hand not only those in single minded pursuit that wanted to possess gold as they has been assured that the financial Armageddon was going to begin at any moment, but then the subsequent collapse and surrender.

As we know, in near classic cyclical fashion we saw gold begin a major advance beginning soon after we entered the new century and raced to new record highs along with almost all other commodities as financial panic engulfed investors once again. This time the gold rush was not because of fears of hyper-inflation and a currency collapse but because of a major recession, dramatically rising level of public debt and…fears of a currency collapse. Granted, I have the advantage of now being able to look back at another bubble bursting, but I remember at that time being almost amused when listening to the purveyors of fear and gold weave elaborate tales of impending disaster. I swear they had taken the identical scripts from 1980 and replaced the names Carter and Volcker with Obama and Bernanke and hyper-inflation with hyper-debt. There is a theory that one of the reasons that the 30-year cycle is so dominant is that you have replaced an entire generation at the decision making level and of course the new never want to listen to the old as we are always that much “smarter” than those who came before. We certainly saw that happen as the most recent gold bubble was growing.

Actually I digressed as to what led me to the topic; this week there were a number of stories in the press about gold extending lower this week in response to waning demand in China and other spots around the world as economies cool off and of course the rise in the Dollar. Gold has not reached all the way back down to the lows posted at the end of 2013, but this was the lowest we have traded since posting highs back in the spring and it does not appear ready to stop just yet. Sounds just like the rest of the commodities markets right now.

The reason that I find this note worthy is you can look at just about any business publication and you will find a bearish story about one commodity or another. I recognize that there are solid fundamental reasons for this and of course they always need something to fill in the space. But for someone that has a natural contrarian bias, when I see everyone headed in one direction, my antenna goes up on the lookout as to why I need to start looking the other way. As a friend of mine used to like to say, “the Masses are Asses and if you run with them you are liable to get kicked.”

By no means am I implying that gold or crude oil or the grain markets are at a bottom as there is nothing to indicate that is the case just yet. That said though, I do believe it is likely that we have already witnessed the lion’s share of the downside in a number of these markets and becoming wrapped up in all the bearish talk at this point will blind you to potential signs that the end of the move is coming. Markets always look the most bullish at the top and the most bearish at the bottom. Unfortunately because of that, they always trap a lot of people at each extreme, particularly those the most emotionally attached to the value of the product.

I have written numerous times over the past couple years that commodities were entering a period of realignment as we determine the new trading parameters for post-30-year peak. That said, for several markets I believe we are into the twilight period for the break and now would not appear to be the time to panic on the bear side. As I stated before, I am not saying that I believe we are ready for any immediate turnaround, nor is it an excuse to not make marketing plans and decisions. But if your choice is based solely on a feeling of desperation, chances are the decision will be not be the correct one.

Without some type of miraculous recovery today, the wheat market will have closed lower for the fourth week in a row and at the lowest level for a spot contract since June 25th, 2010. With the exception of dryer than normal conditions in Australia, just about every news item is negative. After showers pass through this weekend the weather outlook appears conducive to wrap up harvest of the spring wheat, export sales were sub-par yesterday morning at 11.6 million bushels with little interesting in the lineup and of course, stiff competition in the international markets as France and Russia aggressively market their crops. Without bearish news we would not have any it seems.

I intend to expand on this theme a bit more in the weekend comments but it would appear that we are reaching the point in not only wheat but commodities in general that everyone has given up hope. All they can envision is low to no inflation and declining prices ahead. For me, that begins to raise a big warning flag. This is not to say prices will not head lower for the near-term or that it can identify a specific point in time for which we will turn around, but this is the kind of attitude that develops and exists when you are approaching lows in markets. As one of my favorite saying goes, when everyone is thinking the same way, no one is thinking and once that happens, we will miss subtle changes that are taking place in the undercurrent.

Keep in perspective as well that markets always overshoot be that at bottoms or top so for now, we need to remain patient as the market demoralizes the last of the bulls.

Corn

While weak, the corn market has still been resistant to pressing into lower lows but with the selling witnessed this morning, it would appear that we will put that to test for the weekend. Here are well we are struggling not only with the weight of a potentially larger crop but the overall negative attitude toward commodities in general.

Export sales last week were Ok, coming through at 26 million bushels. This brought the marketing year to date figure up to 513.3 million bushels so we need to average just 24.7 million per week to reach the target of 1.75 billion. The most discouraging aspect of this is that we really need to boost that number closer to the 2 billion bushel level to lift prices away from the basement. The USDA did announce a sale this morning of 376k MT of corn to Mexico.

The most positive news I have seen in the past 24 hours is the fact that the CME lowered margins on corn from $1500 to $1250 per contract. While this may not sound like a big market influence and reflects the lack of volatility we currently experience, traditionally this has been once of those minor flags that is waved when you begin approaching lows.

After showers pass through the Midwest this weekend, the outlook appears to be nearly ideal to put the finishing touches on the corn market. With ample moisture already present we should potentially be building test weight, which would be that final essential step for maxing out the yield this year. It would appear that the harvest should really kick into gear once the calendar rolls over to October.

Later this morning Informa will be releasing their initial estimates for corn and bean acreage for 2015. While this will only the opinion of one company and should not be a market mover, it should provide an interesting base from which to begin discussions about next year.

Soybeans

Solid export sales yesterday of 53.9 million bushels were ultimately not enough to support the bean trade nor was a sale announcement this morning of another 1.236 MMT or 45.4 million to China as prices have now extended into lower lows for the year. With a clear forecast in the weeks ahead the trade will be looking for harvest to kick into high gear. Yield reports from areas in the south continue to be outstanding with 60 to 90 b/p/a’s commonly heard.

The CME also cut margin on beans, moving from $3000 to $2500 and meal from $1500 to $1300. As I commented under corn, traditionally you begin to see margins reduced as you approach lows in markets but the key word to keep in mind here is “approach.”

The Informa estimate for 2015 beans should be particularly interesting as we will potentially be coming away from a huge record acreage of 84.8 million this year. With 9.75 new beans versus 3.80 new corn, will many intend to cut back on the beans? A topic of debate for another day.

An early travel schedule has meant that the morning comments will be out before export sales are released this morning so we will report on those figures later today.

Wheat

All the nervous anticipation concerning a possible early interest rate boost by the Federal Reserve was for naught as policies were left at the status quo with a rate hike expected sometime later in 2015. There were two dissenting voices on the committee but Chairman Yellen, citing the ongoing concerns about the slow employment gains and fledgling economic recovery in face of world headwinds as the reason to stay on the current course. This news still did not temper the enthusiasm in the dollar as prices poked into a higher high yesterday and has advanced again overnight. Other news is sparse this morning. The Russian wheat harvest has advanced to around 70% complete and yield has continued to perform better than expected. Estimates for the total crop range between 59 and 62 MMT. The forecast in Australia leans to the dry side, which could be a drag in yields as plant should be filling out heads but hardly an alarming problem at this stage. The world remains awash in wheat and as we have been experiencing, others in the Northern Hemisphere outside of our borders continue to dominate the export scene. Chicago futures did close higher yesterday and are relatively flat this morning which could be suggesting that we have readjusted to the recent supply increases and with nothing exceptional happening in the Southern Hemisphere, we may be ready to begin base building once again. This is not to say that we could not still see a dip in December Chicago futures down against the 2010 lows at 4.73 but as a whole may be set for sideways action for the last quarter of 2014.

Corn

The corn market struggled throughout the day yesterday trading in a very narrow range but is realistically treading water at this point. This is really the third time since the spring peak that we have witnessed this type of price action. The first was back in June when we spent 3-weeks chopping between 4.55 and 4.35 in December futures before exiting through the lows. After reaching the 3.60 level then in early August, we spent a little over 4-weeks trading between 3.60 and 3.80 before the next push lower. In each case, the breakdown occurred right at the end or beginning of the month. Would this suggest we could keep tracking sideways now through the end of this month? Certainly not out of the question. Ethanol production last week remained very solid as we manufactured 273,126,000 gallons, which should work out to around 98 million bushels. Note though that stocks jumped 33 million gallons this past week and with the summer driving season behind us, DDG’s under pressure, and the corn market largely flat for now, it could begin to weigh on margins. Not surprisingly, there continues to be a debate as to the discrepancies between the USDA/NASS acreage numbers and those of the FSA. Realistically there always is and the fact that there are stores that the FSA will update the numbers at least another time just adds to the dispute. We very well may eventually see the acreage number pulled lower but I suspect for the time being, the focus will again shift to the many exceptional yields being reported. This is something to keep in the back of your minds though as if you recall, it was back in January of this year when the bear was all primed for a negative final production report and when they were not granted their wish, that is when prices really turned the corner back higher.

Soybeans

It would appear that the bean harvest in not stepping into gear fast enough for a number of processors as there are reports each day of additional plants shutting down for maintenance. The potential challenge here is that losing capacity now could make it difficult to reach the USDA target at 1.770 billion bushels. Keep in mind that would be the 3rd largest crush on record. Export sales are expected to be in the 1 to 1.4 MMT range as China continues to book in needs through spring. Outside of this I find very little fresh new to mull around this morning as the trade awaits additional harvest news. It would appear that there could be a few showers that pass through the Midwest over the weekend but outside of that, the weather would appear ideal to speed up the maturation and of course the harvest of this crop.

Generally quiet news morning as we reach mid-week with many traders/investors as concerned about the Fed Reserve Open Market Committee meeting that is being held as anything Ag related. As has been the case when this group meets, everyone will be scrutinizing each and every word for a hint as to when they may begin boosting interest rates, or maybe better stated if there is a possibility that it could occur sooner than later. A rise in rates would not only potentially stall the equity markets but should send the U.S. Dollar higher, which of course is not a positive for commodities export business.

As expected, the Egyptian wheat tender went to France who is aggressively marketing their crop. Turkey, the T in the MIST countries, was in for 200k MT of US wheat and Morocco is tendering for 386k MT. Weekly sales will be released tomorrow morning.

The ranges for wheat overnight are quite small at this point and we currently hover around the unchanged mark but this of course after dropping to lower lows once again yesterday. I continue to believe December futures have room to slip down to at least the June 2010 lows at 4.73 between now and the beginning of October.

Corn

Well, the FSA acreage bump faded rather quickly yesterday as ongoing reports of big yields occupied the minds of traders. While I suspect we will eventually see the USDA adjust corn acreage lower, considering that the FSA data is evidently still incomplete and may not be finalized until December, that would mean changes will not be made until the final reports in January. Of course the horses are long out of the barn by then so closing the door a touch may not be much of a market mover at that time. We did still manage to close right around the unchanged market so it was a victory of sorts.

At this point lower prices do not appear to have stimulated any exceptional export interest for new corn. The only tender lining up overnight is Israel looking for 70k MT and it would appear the report tomorrow morning will not hold any positive surprises. You have to imagine that outside of immediate needs, buyers will be content to allow the market to come to them. Also consider the fact that since July, new crop corn futures have lost around 17% and during the same time the dollar index has gained over 5% so all the flat price decline is not being reflected in other countries.

While I am not sure if this qualifies as new or old news but it was reported overnight that China and the US failed to reach any kind of agreement on the testing for and acceptance of certain GMO’s in DDG’s as well as corn. This effectively continues to lock us out of the majority of the Chinese market at least until they suffer a crop problem. You have probably all read that Cargill has now filed a suit against Syngenta over unapproved GMO varieties which will be very interesting to watch unfold.

The corn market has actually been quite stable now for the past 5 sessions which is not unexpected but I cannot imagine we will hold this range for any extended period. A push through exiting lows in December corn at 3.35 ¾ should open the door for a slide down to the targets between 3.10 and 2.90 most logically in October.

Soybeans

The early bean strength yesterday fizzled quickly after touching the 10.00 mark in November futures. It would appear we know where the sell order will be sitting is at this point. We have tried to stabilize and bounce overnight but without a fresh positive story soon, I suspect the expanding harvest and consistently solids yield being reported will overwhelm the support once again.

According to the Ministry of Agriculture in Argentina, farmers in that nation have sold just 58% of this years’ crop. Last year at this time they had sold around 66% which was also at a slower pace than usual and I have to believe heavily influenced by the troubled political/economic situation down there. It is better to hold a commodity than a worthless Peso. There are two negatives for the US with this situation though. First, it means there is a larger current world inventory just as our new beans are becoming available and hence, greater competition. Second, this means the Argentine farmer is probably cash strained moving into the spring season, which would suggest they will plant crops that require less money, i.e., more soybeans.

As with the corn, the FSA data released yesterday would hint that we could see acreage adjustments on future reports but if that does not happen until January, it could be anti-climatic. I continue to believe we will see November beans slide down to at least the 9.50/9.40 zone and if yields continue to come in a solid as the early numbers, a push down against 9.00 would not seem unreasonable.

While it is not much, the wheat market is looking at a higher trade here overnight and we have posted the first higher high in the past 7 sessions and only the second in the past 11. Hardly what would qualify as a turnaround but you have to begin somewhere. I suspect the bounce is primarily technically inspired, as there is precious in the news that one would construe as positive. The Russian Ruble has pushed to record lows against the dollar keeping US wheat less than competitive against the Black Sea and French wheat is even less expensive than the Black Sea currently. Export inspections last week fell right in the range of estimates at 20 million bushels. This brings the YTD loadings up to 279.8 million bushels. The glass half full crowd would say this means we need only average 17.4 million per week to reach the USDA targets but the half empty group would counter that this pace is 34% behind last year and with stiff competition the picture will not improve. Spring harvest has reached 74% complete, which was up 16% for the last week and is 12% behind the normal pace. Winter wheat planted is now at 12% complete, up 9% in the last week and 1% ahead of the normal pace. While the bounce the morning allowed the few remaining bulls a little chance to take a sigh of relief, I would not be too confident that we have seen the last of the selling. I still expect to see prices press into lower lows at least once more time with room to take December futures down to at least the 4.73/4.83 range.

Corn

The corn market did finally catch a little bounce for the close yesterday and have followed through a bit overnight. It would appear that concerns about possible acreage adjustments after the FSA updates number has done what the threat of an early frost could not. As it turns out, the FSA release did not really provide much for the bull to hang onto. The FSA reports that planted acreage that has been certified is 84.3 million, which is actually 1 million higher than their August estimate. There was speculation, evidently by the bulls, that the figure could be a million lower than the previous estimate. To complicate the figures even more there is a story circulating that due to technical difficulties the FSA would not have the “real” final data until December. The Farm Service Agency has many fine individuals that work within their offices and are asked to do more with less each year. I shudder to think of the outcome had some Washington administrators and politicians had their way and were successful at pushing the entire crop insurance program onto them. We appear to be past the cold weather concerns and with forecast for normal to above normal temperatures stretching now through the end of the month. This should help crop development speedily move along. As of September 14th corn in the dent stage had reached 82% which is just 3% behind normal but corn mature stood at 27%, 12% behind the 5-year average. The crop rating was unchanged at 74%, which other than for the historical reference means little at this point. This was the first week of summarized harvest data and for the 18 major states and we stand at 4% complete versus a normal of 9%. North Carolina and Texas were the furthest advanced at 52% and 59% respectively. Illinois only reflected 2% complete versus a normal 13% and Iowa was a goose egg compared with a normal 5%. After a nice bump the previous week, export inspections were pretty dour. For the week ending September 11th we loaded just 29.2 million bushels, which was a solid 10 million below even the lowest estimates. Year to date we stand at 57.75 million bushels. It is nice to see a nice little bounce this morning following-through on yesterday strength but it is difficult to imagine that is will carry far. Yield estimate continue to increase as Cordonnier has pushed his number to 173 and I have read other now advertising figures in the upper 170 zone. There are some who suggest that the FSA figures will ultimately result in a couple million cut in acreage. While I do not profess to have any insight as to if that will be correct, keep in perspective that a boost in yield to over 175 would more than compensate that kind of loss in acreage. Overhead resistance should be tough as we approach 3.50 in December futures and I expect would be thick from there all the way to 3.60. The last corrective phase in corn entailed 6 weeks of sideways trade but with harvest upon us, it is difficult to imagine a replay of that kind of action.

Soybeans

Anticipation of the FSA acreage data prompted a bean bounce as we but we have the same type of semi-conflicting information as well. The FSA reports planted acres reported at 80.8 million, which is up 1.6 million from last month. They have prevented plant at 841k which is 14,000 acres higher than the August figures but of course this all could be adjusted in December if the stories are correct. As with corn, a higher yield on the next report could easily offset any loss in acreage. Condonnier also bumped his bean yield but just by 1/10th to 46.7. There were no surprises in the monthly NOPA crush data as we used 110.66 million bushels of beans last month. Crop conditions were left unchanged once again 72% good/excellent and beans dropping leaves moved to 24% of the crop, which lags the 5-year average by 8%. November beans pressed back against the 10.00 level overnight and I suspect we will find very stiff resistance from there up to the old lows at the 10.20 mark. The current weather outlook for the balance of the month would look ideal to kick the bean harvest into high gear and I cannot help but think that will squash any rally in the near future.

Wheat
Markets have picked up right were we left off on Friday. December wheat has now pushed down into the same sub 5.00 level that the September contract reached last Friday at expiration.
Saudi Arabia was active in the market over the weekend as they have purchased 610k MT of wheat in the world market. I have yet to see the actual breakdown but I understand that it will be sourced from Europe, Australia and the United States.
SovEcon, who is a private Russian Ag consultancy company, boosted their estimates for the overall Russia crops. The total grain crop is expected to be in the 104 to 106 MMT range, which is up from their previous estimate of 98 MMT. Of this total, wheat is projected to represent 60 MMT, which was up 2 MMT from their last estimate. By no means is this a shocking revelation as these size numbers have been bounced around for some time now but it certainly does little to temper the negative psychology of the market. In fact, it would seem that just about everywhere you turn right now you will uncover a bearish commodity story.
If it is not about grains it will be about gold or energies or vegetable oils. When I see information become so lopsided, my contrarian nature begins kick in and I begin to look for a reason as to why the majority could be wrong but unfortunately at this point, it is nearly impossible to find one, or at least one that could stem the negative outlook.
It does not sound like the so-called peace in Ukraine will be able to be sustained much longer which could provide a little support. Other than that, we shall see what the weekly exports and harvest updates tell us throughout the day but lacking something really fresh, it would appear that prices will continue to drift lower for now.
Corn
It is indicative of just how weak a market is when there is a frost in parts of crop production areas and we do not even bat a bearish eye. Granted, we do not know what or if any damages may have occurred and it represented a small portion of the production area but after the hype of the past couple weeks about an early freeze you might have though it would be worth a few clicks higher.
This is indicative not only of the potential crop size that we are looking at this year but also the larger disillusion with commodities that is being experienced from the speculative/investment sector. Hedge funds have reduced long holdings in Ag commodities to levels not seen since January and with the news at hand, it would appear that the exodus should continue.
The USDA did announce a sale of 120,000 MT of corn to Mexico this morning as they continue to be one of our most consistent buyers. As the “M” in the MIST nations, they will be a country we need to count on and watch as a key consumer of US Ag products in the years ahead.
It would appear that the great lakes region has moisture is store for the week ahead but temperatures across the entire upper Midwest are forecast to return to normal to above normal readings. I saw that here in Northern Illinois we could reach into the low 80’s by the end of the week, which would be a full 25 degrees warmer than last Saturday.
Evidently with the freeze story now in the rearview mirror, unless we turn excessively wet, most of the action will be centered on yield reports. We could experience a week to 10 days of stable action but I suspect that as the calendar turns over into October, the competition will heat up again as to how large a crop estimate there can be made.
Soybeans
The bean market begin this new week under pressure but did not press through last weeks lows and have found a little buying now in the daylight hours. There would appear to be little if anything in the news to stimulate much buying outside of uncertainly over possible frost damage to the north and if that is the case, I would not expect to see it carry very far.
We will have the August crush number released later this morning with the trade expecting a figure of around 111.6 million bushels. I guess not bad for a period when we were supposed to have run out of beans.
Export inspections and weekly crop conditions will be released throughout the day buy I would expect either to be much of a market influence. Ratings should be unchanged to possibly a smidge lower.
Like corn, we sit in a very oversold short-term position and could be in line for a week to 10-days of sideways to even higher action. If correct, look for very stiff resistance in November beans back between 10.00 and 10.20.

Well, another report party is over and it provided grain producers little to want to celebrate, at least in respect to the price outlook. Now we can begin to focus on the October figures.

Personally I thought the wheat market received some of the most negative information. Imports into the US were boosted 10 million bushels moving them back to the same levels as last year and exports were cut 25 million bushels reflecting the current non-competitive position of US product which pushed ending stock up 35 million bushels to 698 million. If correct, this number is 108 million higher than last year but still 20 million lower than the 2012/13 marketing year. Actually, this is still the second lowest ending stocks figure since the 2008/09 marketing year as the average for the past five years has been 778 million.

The world numbers were no more encouraging. The Australian crop was cut .5 MMT but the EU booted 3.1 MMT and Ukraine 2 MMT. Of course we know that there is a lot of off grade wheat from those two regions, which discounts the price even more. The Russian crop was left unchanged at 59 MMT and many private estimates have pushed projections into the 61+ MMT range so the world ending stocks could very well grow even more on successive reports. As it turned out with the current number, carryout was bumped up 3.42 MMT to 196.38.

This boost does not quite return us to the type of world carryout number that we were living with between 2009 and 2011 that ranged between 199 and 201 MMT but the information was still enough to push us into new lows once again. Realistically, there is little in the way of support between the current price and the lows that we posted back during in 2009 and 2010 down at the 425 level. If the USDA finds more wheat on the October report, it would not seem unreasonable to see prices return to that range.

Corn

Realistically, there was nothing at all outlandish in the corn report yesterday but certainly nothing positive or even something less bearish than expected like in the August figures.

The headliner is always the yield, which was 1 bushel above report estimates at 171.7. Really a pretty insignificant difference but of course would be a new record eclipsing the current by 4.2% and they still left room for additional increases in future reports. Yes there are record population counts and record ear counts but not record ear weights for many states were it would seem likely. Regardless, the net result was an increase of 363 million bushels of production to 14.395 billion bushels. While a producer in areas that have experienced less than ideal conditions this year might argue with this number, it has not produced much controversy in the industry but the same cannot be said for the usage estimates. Feed/residual was pushed up 75 million to 5.325 billion, the highest number in seven years, ethanol was bumped 50 million higher to 5.125 billion matching the record set last year and exports were boosted 25 million to 1.75 billion bushels. While economics 101 would tell us that lower price should stimulate additional demand, these assumptions could be difficult to defend. The five-year average for feed/residual is 4.8 billion bushels, ethanol while profitable today could be facing headwinds from a growing world inventory of crude oil and the uncertainty of the mandate and exports may be hindered by the rising dollar. The point is, with these optimistic usage numbers, additional increases in production would like add directly to the bottom line. Speaking of which, ending stock did crest the 2 billion mark and are currently projected to be 2.002.

World ending stocks were bumped up just 2.09 MMT. To arrive at this number Argentina was cut 3 million, China 5 million and Ukraine and the FSU 2.5 million to partially offset the increase in the US of 9.24 million, Brazil 1 million and the EU for 1.3 million. Regardless, the figures does set a new record for raw ending stocks by 16.83 MMT and the highest stocks/usage ratio at 19.56% since the 2001/02 crop year.

As we are aware, this sent prices into new lows again yesterday but hardly what you would consider a panic wipeout. There remains a few minor concerns about cold temperatures over the next 24 hours but in lieu of these figures, I cannot imagine we could see much of a response even if there were frost to the north and west. For now, any short-term rallies would appear to be for the selling and those measuring targets at 3.00 that seemed so extreme when prices gapped lower back around the 4th of July, now appear realistic.

Soybeans

As with corn there was really nothing shocking in the bean estimates but neither was there anything that would suggest we have reached a low. The most positive figure in the entire report was that for the 2013/14 crop year the USDA bumped crush and exports 5 million bushels each so we brought in 10 million less that previously thought. After a year of touch and go inventory, no one batted an eye. Yield was increased 1.2 bushels to a record 46.6 b/p/a pushing the total production up top 3.913 billion bushels, 97 million higher than last month. This of course falls short of some private estimates that have predicted a crop 4 billion. While not impossible on future reports, yield would have to push up another bushel for that to turn into reality. Total usage was boosted 42 million bushels broken down with an increase in crush of 15 million bushels to 1.77 billion, the highest number since 2007/08 and 25 million in exports to a record 1.7 billion. Residual was increased 3 million so the net result was an increase in ending stocks of 45 million to 475 million. This would be the largest carryout since 2006/07.

On the world accounting sheet, in addition to an increase in US production, the Argentine crop was bumped up 1 MMT and Brazil 3 MMT with the net result after adjustment for usage an increase in world ending stocks of 4.55 MMT. This leaves us with a record 90.17 MMT in ending inventory, which eclipses the previous record set in 2010/11 by 18.45 MMT.

As with corn, beans fell into lower lows but did not witness a panic collapse to the downside and have even tried to bounce a touch this morning. November futures have reached down to what were my initial targets at 9.80 but I suspect holding at this zone will only be temporary. Not only are we on the cusp of full-scale harvest here but also South America will soon be moving into the field and as I reported yesterday, it would appear the plans are to increase bean acreage at the expense of corn. Granted, that would not assure a bigger crop but without any issues, we would be staring at a bleak outlook indeed. Prior to the report I had felt that the downside of the bean market could be limited to the 9.50 level but with growing numbers and potential for another large southern hemisphere crop, I believe I need to expand the downside potential to the 8.80/9.00 realm.

The September crop production report is not the only news in markets today but it is certainly the most dominant story we will deal with. Wheat turned in the most miserable performance of the grains and soy markets yesterday as new crop contracts for those two commodities stabilized but this market continued into lower lows with little supportive information to help.

Russian and Ukraine continue to act like they at least want to try and get along with reports that Russian troops have once again pulled away from the border but you can be assured that will not be the last of this. Putin appears intent on reclaiming additional parts of Ukraine and evidently will not stop until he has accomplished that goal. While it will provide us with a market startle every now and then it would appear that none of this has had any impact on the Black Sea wheat trade other than to push the currencies of those two nations lower making them even more competitive on the world stage.

All that said, we did see a nice rebound in wheat sales this past week as the US sold 690,200 MT or 25.36 million bushels. The top purchasers were Taiwan for 99.5k MT, Malaysia at 93.3k MT and the Philippines for 91.5k MT.

For now we wait for 11:00 CT and see wheat Uncle Sam has to tell us. The average estimate for ending stocks sits at 664 million bushels.

Corn

The corn market did witness a little stabilization yesterday and while under pressure overnight, has continued to hold the existing low. It just so happens this 3.43 level in December futures is somewhat of a benchmark as it was the reaction/cycle low posted back in 2010 before rallying sharply for more than a year so this is a line in the sand that would actually mean something if it were crossed.

The weekly EIA ethanol numbers were solid once again as we produced 272,538,000 gallons, equating to around 98 million bushels of corn used. Ethanol stocks grew for a second week in a row by 15 million gallons. Ethanol has certainly been one of the stalwarts for usage for the past year but there are several storm clouds looming overhead that need to be watched closely. First, we still await word from the EPA after the public comments about mandates for the future and seeing that ethanol appears to have fewer and fewer friends in Washington all the time, there is no assurance that news will be good. Second, crude oil has really been in an overall sideways pattern now for the past couple years and with worldwide production on the increase and the economies of a number of countries around the world either moving backwards (EU) or slowing down (China) that is not a good combination for rising prices. Ethanol has enjoyed a good mix of declining corn prices and crude holding above the $100 barrel mark and if the latter breaks below that $100 level in the Brent market, the profitability of the sector may not look as enticing.

Exports sales to kick off the new marketing year came in at 563,200 MT or 22.2 million bushels. Of course we now have 51 more weeks to watch the sales pace but this should bring the current total to 487.4 million bushels and moving forward will need to average 24.3 million per week to reach the 1.725 billion bushel target.

Of course the big numbers are just a few short hours ahead. The average estimates are as follows; Yield 170.7, Production at 14.28 billion and ending stocks of 2.003 billion.

Soybeans

Even though November beans bounced just a bit for the close yesterday, we still closed below the 10.00 level for the second day in a row. This is the first time that has happened since July of 2010. As with corn, we appear to be holding on until we hear the numbers later this morning but unless we find a positive surprise it is difficult dream up a reason as to why we will be remaining here.

Sales were once again decent but nothing out of the ordinary for this time of the year. For the official first week of the new marketing year we sold 984,300 MT or 36.2 million bushels. We have a familiar line up of buyers with China taking 658.2k MT, unknown destinations at 105k MT and Indonesia buying 94.4k MT. This brings the marketing year total up to 881.8 million bushels, which is actually ahead of last year at this time. To reach the 1.675 billion target we need to average 15.6 million per week moving forward. I understand that China has been shopping South American beans this week.

Looking ahead to 11:00, the trade is excepting a yield number of 46.2 b/p/a, production of 3.882 billion and ending stocks at 452 million bushels.

We have the count down to the September report into effect with T-minus 1,598 minutes to go as I write this comments. I am not so sure the report will really present us with anything of significance for the wheat market but big corn and bean numbers would certainly not do anything to shore up the confidence of the bull.

Yesterday we reported that ABARES had slightly reduced their wheat crop estimate, which was widely anticipated but last night Conab, who is the Brazilian crop agency, boosted their wheat production estimate, primarily due to higher acreage. They now estimate a crop of 7.66 MMT, which would be 38.7% higher than last year.

A good friend who is a meteorologist passed along an update on El Nino last night that indicates that between September through November there is 60 to 65% probability that an El Nino will still develop and then continue into early 2015. That is really not much of a change from the August update and of course too late for an impact on India & Australia but I suppose it could have an influence on weather patterns in South America. Something to remain abreast of.

News from the Ukraine/Russian situation has been very quiet since the ceasefire was called over the weekend and one can only imagine it is just a matter of time before fighting really resumes once again. Outside of this we await the number tomorrow. The average trade estimate for wheat ending stocks is 669 million bushels, which would be up 6 million from last month and world ending stocks expected to be .7 MMT higher at 193.7 MMT.

Corn

December corn continues to flirt around the 2010 reaction low at the 3.43 level as we await the report estimates tomorrow and the expansion of harvest. I should point out as well that once we have moved past the production estimate we can look forward to the quarterly grain stocks estimate that will be released then on the 30th of September. While it should be just as important, of the four published throughout the year, this one carries the least amount of market excitement as we have harvest underway and there is always a debate as to if new bushels have been added into the figures.

Conab now projects a combined first and second harvest of corn of 79.9 MMT. This number is up 1.4 MMT from the previous estimate but still 1.6 MMT below the previous year. Keep in perspective though that the 12/13 crop set a record.

Speaking of records, the trade is expecting several new records tomorrow but of course the key will be how they fall in relationship to the trade estimates. The average yield guess stands at 170.7 b/p/a with production then at 14.28 billion. The 2014/15 ending stocks are expected to come in a few million bushels either side of the 2 billion mark but I suspect a number north of 2 would carry more bearish implications. The average estimate for the world ending stocks calls for a record 190.34 MMT, which would be up 2.52 MMT from the previous.

Seeing that the trade is geared up for pretty big estimates I suppose that we could have the same situation as last month where the numbers were increased but just not as much as the trade expected. While possible, I think the USDA has less fudge room in the usage numbers and the overall negative psychology of the market would overwhelm anything that could be construed as lesser bearish.

Soybeans

Things are pretty wet this morning across the northern bean and corn areas this morning but with harvest still several weeks away, it should not create any problems. Neither would it seem the forecast for the cool temperature late this week as the possibility of frost appears to have been pushed to the far western regions of the Dakotas and Nebraska.

Conab now estimates that the Brazilian bean crop will total 86.12 MMT, which is up .4 MMT from the August estimate. This production was up a whopping 4.62 MMT from last year. In a separate release, the Ag secretary for the state of Parana estimates that for the coming year farmers in that state will cut back on corn and increase beans and with a normal growing season could produce 18% more beans than this past year. Granted there are a lot of ifs in that statement but it reinforces what we have been hearing already in that Brazil will be trying to boost bean production this coming year.

The current trade estimates for tomorrow have the average yield pegged at 46.29 b/p/a for a production of 3.88 billion bushels and a possible ending stocks figure of 453 million bushels. World ending stocks are expected to climb a 1.62 MMT to a stunning 87.24 MMT.

I suspect we will be treading water between now and 11:00 central tomorrow. It would appear that November bean may post a second consecutive close below 10.00 today so if we do not find news to stimulate a turnaround, the technical picture is looking pretty bleak.

Much of the wheat related news released over the past 12 hours has been just a touch supportive for the wheat market but you would never suspect such gauging from the price action. December futures have yet to poke in another lower low but do not remain far away.

Overnight Australia released updated crop projections and reduced the wheat crop .4 MMT to 24.2 MMT. Not a huge shift but it does reflect the dryer than normal conditions they have experienced this year and would be almost 3 MMT less than last years crop.

Also slightly supportive but not surprising were the weekly progress reports. The overall condition of the crop slipped just a bit with the good/excellent category now standing at 60% compared with 63% a week ago. Spring wheat harvest increase 20% to 58% complete but that number is still 20% behind both last year and the 5-year average. The first winter wheat planting update for the year was released and shows us 3% planted vs. the normal 4%.

On the less that encouraging side of the ledger, US wheat remains at a competitive disadvantage to France and Russia and that is reflected in the poor export inspections. For the week ending September 4th we loaded out 19.5 million bushels, which was slightly below the low end of estimates. The good news is that is still above the 17.5 million per week we need to average to reach the USDA target.

As I commented initially, the wheat related news actually leaned to the positive side but with the bearishness building in corn and beans and the uncompetitive position of US wheat, the path of least resistance remains lower for now.

Corn

December corn futures have returned to the recent extreme lows but this morning with little encouraging information to be found. There remains a possibility that some areas in the Dakotas through Wisconsin could see temperature dip low enough to create a little frost but it sounds if this would be brief and the extended forecast from there is very favorable for the final stages of crop maturation.

Gauging from several news stories that I have read overnight, it would appear that a number of people have already moved beyond the September report, which of course has yet to be released, and are trying to outguess just how large the October and November reports may be. The average estimate for the current stands at a yield of 170.7 b/p/a but I have read more than one estimate talking about the eventual yield reaching into the 178 to 181 range. While that could ultimately be the case, this would appear to be a classic case of piling on the down player and see who can outdo the previous estimate. I believe one of the keys on this report will be to see what the USDA uses for ear weight. If they once again use historical averages, there will be room for the number to grown significantly on the later reports.

Crops conditions were unchanged this past week and hold at an outstanding 74% good/excellent. Corn dented reached up top 69% which is 8% ahead of last year but 5% behind the 5-year average. Mature now stands at 15%, which is almost double last week but lags the 5-year average by 11%.

Export inspections bounced back very nicely as we shipped 47.1 million bushels, 10 million above the upper estimates. These bushels were split between old and new crop years so around 28.6 million registered for new.

There would appear to be little more to talk about between now and Thursday.

Soybeans

It took until this morning but November bean futures have finally poked through the 10.00 line. While maybe only a psychological victory for the bears, it is the first time that a November contract has been below that mark since August 3rd, 2010. With the threat of an early frost "melting" away there is little else supportive to be found in the news.

Monthly trade data was released yesterday and we find that China imported 6.03 MMT of beans during August, slightly below the 6.37 MMT they imported the previous year. To date, shipments from the US have totaled 26.7 MMT but the dangerous aspect to that is it represents over 60% of our total bean exports.

Crop conditions remained unchanged for the past week, which is a big accomplishment in itself with the good/excellent category holding at 72%. Beans dropping leaves increased 7% to 12% which a bit behind the 5-year average of 17%. The outlook does call for a pretty wet week for much of the Midwest.

With an increased availability of beans, export inspections actually bounced back to the highest level in over two months with a figure of 6.4 million bushels. Here are well the numbers will be split between old and new with 2.9 million showing up for 2014/15.

We did not appear to unleash an inordinate amount of sell stops when November beans pushed through the 10.00 level but neither have we bounced back. I suspect we should see prices continue chop sideways to lower at least until we see the release of the number on Thursday morning.

Grain and soy markets began trading last night with a little follow-through buying from Friday’s frost talk inspired rally but once the morning weather runs were published, the enthusiasm waned. It is still expected to reach into unseasonably cool temperatures on Thursday/Friday, particularly in the upper Midwest and Northern Plains states but it appears less likely it will produce a killing freeze.

Stats Canada released July 31st stocks reports last Friday and the wheat figure came in a bit under trade expectations. Ending stocks were estimated to be 9.8 MMT compared with an industry estimate of 10.7. Regardless, the number is by no means bullish as this is still a 9-year high, so qualifies as just a little less bearish.

A tenuous cease-fire exists between Russia/Ukraine and I would probably want to take under on that holding for any length of time. Other than that, we have exports inspections and the weekly crop updates this afternoon but I suspect the trade will primarily focused on the Thursday reports. Currently the average trade estimate for the wheat ending stocks is at 668 million bushels, which would be an insignificant increase of 5 million from last month.

As I commented in the weekly newsletter, with the push into new lows in the December contract there is potential now for that contract to reach down to the reaction lows around 5.15 once the September contract has expired. That said, we have now inverted September and December futures, which should suggest downside potential is limited. As a whole, I will be looking for more sideways action as we move out into corn and bean harvest.

Corn

With the potential for freezing temperatures later this week reduced, the corn market has little else to find support and after a slightly higher open, prices turned south once again. At this point, we have not actually erased all the gains posted on Friday but unless someone can find a new story or breathe (chilly) new life into the previous it is difficult to imagine we can hold onto this level for long.

Having shoveled many a load of 40%+ moisture garbage corn off of wagons and trucks in the fall of 1974, I would be remiss to not take premature freezes seriously but I always watch with amusement some of the hype that surrounds cold temperature forecasts. As most of us know to kill a plant we need at least 3 hours of 28 degrees or an equivalent and I have not seen anyone promoting that type of weather for this week. If we reach the low 30’s maybe it will kill of a few of the mosquitoes we have been contending with.

Looking out to the report on Thursday, the average estimates currently have the corn yield at 170.8, which is very close to the 170.3 that Informa published last Friday. The average estimate for production stands at 14.29 billion bushels and a projected carryout of 2.01 billion bushels. While realistically a figure of 1.99 verses 2.01 would be insignificant, psychologically once we have breeched that 2 billion mark, bears really seem to have the upper hand.

While I do believe the corn market is in the final stages of this bear swing just how low is low is yet to be determined and how long we wallow around in the basement is unknown as well. Once we have moved beyond the harvest/supply mentality, economics will come into play once again and demand will be the driving force. As I commented last week, we have already been witnessing solid interest from the "MIST" countries and lower prices should help stimulate that more. One of our biggest enemies moving forward could very well be the strength of our own currency.

Soybeans

The rally posted late last Friday was enough to take November beans right back against what has developed as support between 10.20/10.22 but after a higher start overnight, we are back below those levels once again. As with corn, without a threat of frost there would appear to be little supportive in the market right now.

Yield reports from the south continue to filter in and they remain consistently above average with numbers between 70 and 90 b/p/a common. Considering how quickly a number of fields are turning in Northern IL and Southern Wisconsin, in would appear that we should be within a couple weeks of hearing yield numbers from this part of the country as well.

Looking out to Thursday morning, the current average trade estimate stands at 46.2 b/p/a. This could be an increase of 8/10th of a bushel from last month and is right on top of the number Informa published on Friday at 46.1. The estimate for crop size sits at 3.88 billion and the projected carryout at 453 million, which would be up 23 million from the August figures.

Last week November futures came very close to touching the 10 even point and while I am not expecting a wipeout, I would not be surprised to see a 9 printed at the front of the price between now and Thursday. If correct, that would be the first time that has occurred in a November contract since August 3rd, 2010.

Just when everyone was becoming comfortable with solid monthly jobs gains in the United States, the pitcher throws us a curve ball to make sure every is paying attention. After averaging gains of 226,000 new jobs each month for the past seven months, during August we only produced 142,000 new jobs. Realistically, one month does not a trend make but it did provide everyone in the financial circles with a little something to chew on that did not taste quite so good. When you truly dig into the figures there nothing was really too alarming and shows the dip was probably just a seasonal swoon. Hourly earnings were higher, part time workers looking for full time worked dropped 2/10th and the number of those unemployed more than six months fell as well. Additionally, the unemployment rate dropped another 1/10th and stands at 6.1%. There remains one area of concern in that the labor-force participation rate clicked lower and sits at the lowest level in over 40 years. At first blush the equity markets took a little gasp for breath but quickly revived and went on the post the highest daily and weekly close on record. Realistically, this report reduced the risk of the Fed upping interest rates earlier than thought, so bulls can sleep peacefully for a while longer.

I really believe two other economic releases this week were more interesting and could impact those of us in Agriculture even more. The first came from the Commerce Department who reported that the trade gap narrowed in July as exports climbed .9% while imports climbed as a slightly lesser .7% leaving us with a trade deficit of $40.5 billion. Demand for U.S. autos and industrial supplies grew while, and take note, demand for foods and consumer goods fell. Overall, this has to be interpreted as positive for the domestic economy, especially considering that the petroleum deficit fell to the lowest levels since 2009.

The other announcement this past week came from the European Central Bank in the form of another surprise interest rate cut, moving their refinance rate down to .05% and the deposit rate, the rate which the European Central Bank pays for deposits, to minus .20%. Yes, you read that correctly—a bank in Europe would have to pay the ECB to hold its money. But this is not new, as they had already taken the rate into negative territory a few months ago. While the overall economy in the European Union has improved over the past five years, it has never reached into inflation adjusted positive territory. Recently the stalwarts of the growth, Germany and France, have stagnated, so it would appear the overall Union could be ready to slip backwards once again. Of course, outside of the negative deposit rate and lack of QE stimulus, you might ask why this is important to us as the ECB is evidently reading the same script as the Federal Reserve has for the past five to six years. The answer lays in the reaction to the currency. The Euro quickly broke over 1 ½ %, extending what has been now been a six month decline in the Euro against the dollar and an overall rally in the US dollar now for the past two years. Inflating this rise in the Dollar even more has been weak economic performance from Japan and the conflict between Russia and Ukraine, which has unleashed dramatic drops in both the Ruble and Hryvnia. By no means has this taken us to historically dramatic levels in the dollar but the trend is decidedly higher and recent information would suggest we are not done with the rally yet. It would appear that the United States has moved from being just the best looking horse at the glue factory to potentially being able to walk away from there on its own hoofs.

Now, I am not going to profess to know just how much of an impact this will have on our overall Ag prices, but it would stand to reason that a rising dollar places us at a competitive disadvantage. This at least can partially be witnessed at the Black Sea right now. With US domestic usage basically flat-lined, we need to see growth in exports to begin eating away at the growing stockpile of grain that we have as well as a continued expansion of meat export business. Without it, market rallies will be completely dependent on weather issues somewhere in the world, and while they are bound to happen at sometime, the actual market impact will generally be temporary. The best long-term solution to burgeoning supplies is growth in demand. The long-term prospect for this appears great as rising worldwide incomes should fuel increase demands for meat based protein and hence grain demand. But over the short term, the scales have tipped in the wrong direction and a rising dollar will likely not help the situation for US farmers.

Mercifully, we are witnessing a little rebound this morning but it has been a rough week for the grain and soy markets as the increasing weight of larger crops caused the foundation to crumble once again. While we do not know where the close will be today just yet, at current levels December wheat is down 30 cents from the close last Friday.

While there has not been any real "fresh" negative news for the wheat market this week, neither has the been much positive and with Russia and Ukraine at least making plans for more cease fire discussions this weekend, you have eliminated the need for risk premium, assuming there was any to begin with. Of course the other negative generated from the problems over there has been the collapse of the currencies of those two countries and then add in the bleak economic performance in Europe and it is understandable as to why the U.S. Dollar is once again the currency of choice for investors. It has reached up to levels this week not seen since July 2013.

Export sales did not provide us with anything to be encouraged about either. For the week ending August 28th we sold just 168,700 MT of wheat or 6.2 million bushels. This is down 58% from last week, 56% from the 4-week average and 60% from the 10-week average. Year to date this bring sales up to 11,436,000 MT or 420.2 million bushels and moving forward, we now need to average 12.9 million in sales each week to reach the 925 million target. The Black Sea dominates.

Corn

The bearish supply news continued to pile up on the corn market this week, which brought on what appeared to be the inevitable; that being a push into lower lows for the year. While I believe many in the trade feel the USDA will not hit us with both barrels next week, they also believe that the September report will not be the largest. Informa will release their September estimate later this morning and The Hueber Report did issue ours yesterday pegging the corn yield at 171.6 for a crop of 14.38 billion bushels. We are also looking for ending stocks to crest the psychologically negative 2 billion mark, looking for 2.038 billion. If/once carryout is above 2, it will potentially be the first time we have been north of that mark since the 2004/05-crop year.

The export sales to finish out the 2013/14 marketing year were a negative 300,000 bushels but unfortunately the new sales were pretty uninspired. We sold 525,600 MT or 20.7 million bushels. This number was down 24% from last week, 29% from the 4-week average and 25% from the 10-week average. The best purchasers were unknown destination at 268.3k MT, Mexico at 103.1k MT and Columbia at 86.2k MT. There was another sales of 120k Mt reported to unknown destination yesterday.

I am not terribly confident that corn will be able to maintain strength for the close today but at the current trade, we will have lost around 18 cents since last Friday and will potentially post the lowest weekly close for a December contract since early October 2009. With no surprises next week, I have to imagine that prices will continue to drift lower between now and the report on the 11th of September. In light of the overall bearish sentiment, this appears to be a market that could set the extreme lows early in the fall but the challenge then would be to find a reason as to why we could need to rally from there.

Soybeans

The selling in November beans appeared to have kicked into a higher gear this week, which is understandable with the onset of harvest and consistent reports of exceptional yields trickling in. Numbers in the 70 to 90 bushel range are not uncommon. While certainly not out of the question, to see a private company print a projection of a 4 billion bushels crop I believe was a shock to the trade. This is not to say that others will not come up to that level eventually but I suspect many will not expect the USDA to do so. We have yet to breech the 10.00 mark for November futures but came within a penny of doing so and unless we see some kind of surprising turn around later today, we should post the lowest weekly close for a November contract since July 2010.

Informa issues their estimate later this morning and The Hueber Report published an estimate yesterday of 45.6 yield and 3.833 billion bushels production. For a reference point for next week, the record production for beans in the country was set last year at 3.369 billion bushels so it is just matter now of finding out how large of a new record we can set. We have ending stocks projected at 447 million, which would be the largest since the 2006/07-crop year.

Exports sales for 2013/14 came through at a negative 3.2 million bushels, which still leaves us 48 million bushels above the USDA target of 1.64 billion but that is somewhat of a moot point right now. Sales for 2014/15 were also a bit of a let down coming through at 869,000 MT or 31.9 million bushels. This was 32% below last week, 28% below the 4-week average and 20% below the 10-week average. The major purchasers were a familiar bunch with China taking 338.3k MT, unknown destinations at 293.1k MT and Spain at 55k MT.

There are still a few forecasters keeping the potential for frost in the outlook for next week in the upper Midwest but most I have read believe damage would be slight to none even if it did occur. As I commented earlier this week and noticed again on travels over the past couple days, I am amazed a just how rapidly many bean fields have begun to turn. If frost cannot provide a pop, I have to imagine that prices will continue to work sideways to lower into the report.

After weeks of trading in a holding pattern, the wheat market succumbed to the pressure in the corn and bean market due to the ideas of a larger and larger production for those two. It is not that this market did not have its own issues as world supplies of wheat are more than ample and the Black Sea and to a lessor extent Europe dominates the export trade. Egypt’s latest tender went to France and Romania and could be indicative that France will be aggressive in trying to liquidate an off quality crop.

Also pressuring wheat, at least psychologically yesterday were the discussions between Ukraine and Russia about a cease-fire. Of course the recent skirmishes had not actually stimulated a rally but could very well have kept a few sellers on the sidelines.

So far in the overnight trade, prices have continued to work into lower lows and if we fail to bounce higher into the close, it will technically confirm a breakout lower. While this may not equate to significant losses, with the supply mentality of all the grain and soy markets it may be difficult to find a reason to rebound any time in the immediate future either.

Corn

It seemed inevitable that the corn market would press through the 3.60 level and head for lower lows but it was a question as to if that would be pre or post the September production report. We now know the answer. While I do not think many believe this USDA will reach up to the FC Stone estimate of 174 b/p/a on this upcoming report it did appear to be the catalyst that tipped markets over the edge yesterday with ideas that if the report is not that large in September, then it will be in October.

We will see the weekly EIA ethanol data later today but it would appear that Friday will be the big news day for the week. Export sales will be released and Informa will offer up their latest ideas for crop size. Seeing that their August estimate was one of the lowest at 168, there is a possibility that they will not be as large as Stone and could provide a little support. I have not seen average trade estimates published yet but we should be geared up for a large number by the time we reach the 11th. As always, the reaction will be about the where it falls in relation to estimates as much as the raw numbers themselves.

Here is a little something to tuck away in the back of your mind for when we reach the post harvest period and the focus shifts to demand. As should be the case, lower prices attract buying interest and we are already seeing solid buying from what are referred to as the "MIST" countries. These are Mexico, Indonesia, South Korea and Turkey. To date this year, these four countries have already spent more in Ag imports from the US than Japan and the EU did in all of 2013. Well worth watching in the months ahead.

There remain some concerns about the cool temperatures forecast this weekend for the upper Midwestern and Northern Plains states but if we make it through then without a freeze, the threat of damage from cold should be a dead story for the year.

Soybeans

The huge FC Stone estimate for beans was ultimately enough drag this market into lower lows as well but concerns about cold temperatures this weekend did manage to lift price back above the previous lows into the close. As with corn, I do not believe many will be looking for this high of a number but the prospect of a 4 billion bushels crop is daunting. Meal continues to be the main factor that has kept this market from free-falling and with new availability on the upswing and stiff competition from DDG’s it is tough to imagine that window is not closing rapidly.

Lanworth also released estimates yesterday and while not quite as large as Stone, posted a yield of 46.7 for a production estimate of 3.852 billion bushels. The biggest surprise came with their projections for the 2014/15 Brazilian crop, which they estimate will rise over 12 MMT to 98 MMT. Granted, we are a long way from determining if that is realistic but if even close, it would paint a bleak picture for prices next year. As I commented under corn, Informa will publish their estimates sometime on Friday morning.

The threat of cold temperature to the north could be enough to stabilize prices now through the end of the week, but if that fails to materialize or produce any damage, there would appear to be little left to support this market.

The wheat market did not have much in the way of supportive news anyway but when stories began to circulate overnight that Russia and Ukraine has agreed to a cease-fire, the rug was pulled out from beneath this market once again. At this point I understand that there is not officially a cease-fire but rather Russia proposed steps to enable one to happen. One can only imagine how that conversation went; Poroshenko; "I think we should call a cease fire." Putin; "Good idea. Give my your country and I can make that happen." Regardless, prices reacted lower once again.

We witnessed a little pickup in the export pace last week as we shipped 28.4 million bushels, which is a full 10 million ahead of the 10-week average. This brings the year to date tally up to 240 million bushels. To reach the target of 925 million for the year, we now need to average 17.6 million per week.

Spring wheat conditions slipped a bit with the wet weather last week but 63% of the crop is still rated good/excellent. The harvest pace was a bit slower than expected having reached 38% for the end of August compared with a normal pace of 65%. The forecast for the Northern Plains states and into Canada does promise drier conditions but until that materializes, we should find a little support.

The breakdown overnight has pushed us right into major support but of course the million-dollar question is; can we hold once again? The problems in Ukraine have pressed the currencies of both they and Russia lower and lower against the dollar, making us even more un-competitive for now and this coupled with the fact that both countries want to export as much as possible to generate income will continue to weigh on values. Ultimately, better quality US wheat should be desirable but that will likely be after harvest world wide is complete.

Corn

Outside of a few "what happens if there were an early frost?" holdouts, it would appear difficult to find many who feel encouraged in the corn market. Of course we cannot forget the old adage that "when everyone is thinking the same way, no one is thinking" but seeing that we sit in the very early stages of what appears to be a record crop, growing larger at least in traders minds every day with nothing on the horizon that could possibly break that psychology, it is pretty tough to conjure up a reason as to why there are not lower lows ahead.

We finished the 13/14 marketing year with a ho-hum export inspection. We shipped 34.4 million bushels for the week ending August 28th bringing the year to date total up to 1.843 billion. We will need to wait now for the census numbers to see if we can reach the target of 1.92 billion bushels.

Generally by this time of year we have the crop conditions report reflecting declining numbers as the crop matures but this year with the ongoing rains, that is not the case. For the week ending August 31st, the good/excellent category increased 1% to a solid 74%. Corn in the dough stage has reached 90%, dented up to 53% vs. an average 59% and mature at 8% compared with the normal 16%. Yield reports in the Southern states have continued to be above average and I see that harvest in Texas now stands at 71%, Mississippi 42%, Louisiana 67%, Georgia 74% and Arkansas 19%.

Most of the markets’ attention will be on the September 11th report and more privates have now posted guesses. Yesterday it was FC Stone who printed a corn yield of 174.1 and total production of 14.595 billion bushels. We should have our numbers put together before tomorrow and I understand Informa will be out on Friday. The positive aspect of this is that by the time we reach the 11th, the trade will have likely heard quite a few large numbers. Could it be that we will have the same reaction as we did in August where the pre-report action undervalued the report figures? The possibility could exist but with harvest kicking into gear, a larger number is a larger number no matter how you want to spin it.

Soybeans

Demand for nearby meal helped prop up beans on Tuesday but ultimately we were not able to close above key resistance levels in November futures. This would seem as expected in face of an expanding harvest. During travels over this past weekend it was interesting to see a number of bean fields begin to turn color. This was not just fields affected by sudden death or brown leave but rather just that gradual shift to yellow. Beans are a photo sensitive crop and I suspect with the day light hours becoming less, some varieties just know it is time to turn.

There must be more that enough green plants around in the upper-Midwest though as crop ratings actually improved this past week. The good/excellent category picked up 2% and sits at an outstanding 72%. Plants setting pods sits right on the average of 95% and beans dropping leaves are just a touch behind average at 5% compared with the normal 7%. Harvest in Louisiana has reached 23% compared with an average 20%, Mississippi scratching the surface at 5% and Texas at 21% compared with a normal 29%. Yield reports from these areas continue to be exceptional.

That appeared to be reflected in the FC Stone estimate yesterday as they boosted the yield to 47.6 and the total production to an even 4 billion bushels.

Export inspections finished the year with a sputter as we shipped just 1.4 million bushels. Year to date we have a total of 1.594 billion through the ports, leaving 45 million to reach the USDA target. We shall see if these are picked up on the final tallies.

The overnight selling has pressed new beans back down against recent lows and it could be a challenge to hold these even before the USDA report is released next week. As with corn, larger private estimates should have the trade pretty well numbed to a bigger figure but record is record, not matter any way you look at it. The export sales figure this week should tell us if China is beginning to slow down their new crop buying activity but regardless, bigger production and a rising dollar do not bode well for the future without a serious problem in the Southern Hemisphere.

We have basically mixed trade as we begin this new week and new month with sparse fresh news to provide direction. Last Friday it appeared that much of the early excitement, if you can call it that, was provided by the happenings in Ukraine and to a certain extent, the same can be said this morning but with even more toned down action. From the reports that I have read, little has changed there and battle between the government and separatists possibly aided by Russian troops continues with the Black Sea trade taking little notice. Difficult to sustain strength on that news.

Of course starting the week a day late all reports will be pushed back a day as well with export inspections this morning and crop conditions and harvest pace released this afternoon. With frequent rains falling across the upper Midwest and Northern Plains over the past week, progress was most likely slow but could have reached the 40 to 45% complete mark. Stats Canada will release the July 31st stocks report on Friday.

Overall the wheat market just remains entrenched in a broad sideways pattern and could continue on that same path through much of the month. Providing overhead resistance will be the uncompetitive position of US wheat on the world stage as well as what appears to a record corn and bean harvest.

Corn

The news for the corn market is also pretty sparse here as we begin this new month. Rains covered a good swath of the country over the weekend hampering some of the early harvest but hardly a market factor at this point. The larger topic would seem to be about potential for an early frost as we have a full moon lining up on the 8th of September. I understand the European models do offer up a slight possibility of this occurring but the US model does not.

There was an interesting piece on the Bloomberg newswire this morning concerning investment activity in Ag related funds. It turns out after a net inflow of money through April, as of the end of August Agricultural exchange traded funds witnessed an outflow of $57.7 million or 2.9%. With the outlook for large crops both here and abroad Ag commodities hold little allure for speculative money, which of course adds to the negative price action.

Macros all appear negative this morning as energies and metals are under pressure and the dollar is higher. With additional moisture in the forecast this week possibly holding up early harvest activity, we may be able to hold this corn market within the existing range for a time but ultimately expect to see prices push through the floor. The September report is only 8 trading days away and without a positive surprise there again, the bears should continue to be in command.

Soybeans

Rains falling through the southern states over the weekend have hampered early harvest activity and in turn left end users with little in the way of availability. This would appear to be providing support this morning but if that can be sustained into the close could be questionable.

There has been increasing talk of sudden death showing up in areas but outside of that and weather delays in the south, there would appear to be little supportive to be found for the bean market at this point. Technically, we do sit in a short-term oversold position so may be able to hold existing lows and possibly even bounce a bit in front of the September 11th report but like the corn market, without positive news in the very near future, the onset of a record harvest should tip the scales lower once again.

You would have thought that the most newsworthy event in Washington this week was the shade of suit that Obama wore at a press conference. While tan in not a color you often see on a President, it probably was not worth the amount of blog posts and other fashion advice that it generated. Outside of that, most of the attention was centered on the Russia/Ukraine situation and ISIS; but believe it or not, there was actually a spot of positive economic news in the mix. The second quarter GDP was released by the Commerce Department and, low and behold, it would appear that we have shaken off the winter blues. After the dismally negative 2.1% number posted for the first quarter, our economy grew a solid 4.2% during the second three months of the year. Additionally, this growth came across all sectors not just with a boost in inventories, and corporate profits appear to be soaring. Contrast this with the EU who could possibly be sliding into recession once again.

While this as well as the job growth provide us with much to be thankful for, it can also blind us to two very import elements and the long-term ramifications. First, how many trillions of dollars of public money has it required to finally jump-start this economy? Secondly, while I do not have the exact figures as to what TARP and the QE programs have cost, a glance at the ongoing escalation in the Federal debt load looks anything but encouraging. Granted, Federal debt began to rise soon after 1980, moving from around $1 trillion to $6 trillion over the next 20 years. But since the Great Recession, we have seen this number escalate from less than $10 trillion to closing in on $18 trillion this coming year. Herein lies one of the fallacies of deficit spending at the public level; in theory, it is a useful tool to stimulate an underperforming economy or stem a decline, but in reality, a politician is never going to take away money he or she has doled out, at least not if they want to be reelected. Furthermore, if this money is in the form of social programs that are not reformed within the context of the demographics of the country, such as Social Security and Medicare and Medicaid, the drain on the finances just continues to compound.

The second element or ill-effect is related to the amount of debt we continue to accumulate as a percentage of the overall economy and this seems to be the factor that has been brushed aside as the economy has improved over the last few years. The theory is that as the economy expands, the debt as a percentage of the whole will become less significant so the deficient spending becomes irrelevant. The pace of deficit spending has slowed down, and we hear discussion about how the continued low interest rates have been such a benefit to slow this down, but who on earth believes interest rates can remain here for an extended period? Even at current rates, the Congressional Budget Office estimates that just the interest to service the debt will reach $799 billion dollars within a decade. Compounding this issue, no pun intended, is that from 2018 forward, the drain coming the baby boom generation will accelerate. Some will argue that the number to watch is the Federal Debt held by the public as a percentage of GDP, which is closing in on 75%, is the key number to watch; others believe it is the total federal debt as a percentage, which is already above the 100% mark. Regardless of which number is watched, each have climbed a near linear path since 2009 and historical research tells us it is when we have pushed beyond that 100% threshold that the debt becomes a serious drag on the economy. Japan has existed with a debt to GDP ration in excess of 200% for years now and should provide living proof, for, as outside of a temporary spurt here or there, their economy has been flat lining.

So by all means, we should celebrate the growth we have posted in this most recent quarter. But soon, the politicians will begin crowing about the fantastic things they have accomplished to turn our economy around. Let’s not forget to remind them that they have still done nothing to confront the real long-term issues that our children, grandchildren and possibly even great-grandchildren will need to confront in the decades ahead.

Usually when I get up in the morning I will check the electronic versions of a couple newspapers to see what we could be greeted with in the markets. When I clicked on the Wall Street Journal this morning, the first headline that I saw stated "Russia Invades Ukraine." That has since been replaced with a "Putin Lashes Out at Kiev" and while that still suggests a situation in flux with tensions running high it is certainly something less than an invasion. As you can imagine my first reaction was to think that this must have really touched off buying in the wheat market but upon looking at the CME quotes, I found that was really not the case either. Prices were higher but certainly not any kind of panic short covering. Could we have a "Chicken Little" scenario here where the trade has heard predictions about possible invasions and disruption of shipping in the Black Sea so often that they have become somewhat jaded to the news?

All that said, as I have commented recently the wheat market appears to have been in a foundation-building pattern for the past 7 to 8 weeks and we are now pressing to and through what has been solid resistance zones. I would suspect that with the long weekend ahead of us and uncertainty around the world, not only with Russia/Ukraine but also the ongoing dryness in Australia, we could see additional short covering into the close. If correct and particularly if we can finish above the 5.71/5.72 level in December futures we should have room for additional strength after the weekend. Keep in perspective though, US wheat is already not competitive for most would-be buyers and forcing prices higher would not help that in the least bit. I suspect the most we could look for without a "real" problem developing would be another 20 cents or so to the upside.

Corn

Yesterday the corn market was able to ride higher on the coat tails of the wheat market but we must have hit a bump along the road last night and fallen off as that strength has not been able to carry-through into this morning. The rally did manage to push December futures back against resistance at the 3.70 mark but with the fundamental picture looking overwhelmingly bearish, we are going to need something more than wheat short covering to lift corn prices higher.

Rains are expected to continue falling across much of the upper Midwest through the weekend, which should weigh on prices through the balance of the day. Markets do close at the normal time today but will not reopen until Tuesday morning so it is difficult to expect much in the way of new positions outside of some possible weekend pre-hedging from the south. Yield reports from the southern states continue to be outstanding and while that by no means assures the same once the harvest pushes north, the trade will likely assume that to be the case.

As I commented yesterday, there is a seasonal tendency for the corn market to turn south after the Labor Day weekend, particularly in large crop years and without and unexpected event; that would appear likely for this season. There is a possibility that prices could remain range-bound into the September 11th report but I suspect that as private estimates and guesses begin to roll in ahead of that number, it will become increasingly difficult for the foundation to hold.

Soybeans

November beans have been able to build a touch on the strength that was posted yesterday but at this point have only been able to almost reach back against last weeks lows at 10.35. I guess in light generally good weather that we have experienced during the month of August it is a victory of sorts that prices have not fallen further but at current levels, we will still have given up around 60 cents and will be trading at the lowest level for a November contract since September 2010.

As we witnessed again yesterday morning on the sales report, China continues to be a large purchaser of new beans and this along with the ongoing tight nearby situation would appear be helping this market from really pushing over the edge. Realistically, we may not see that happen at least until we have a better handle in the next South American crop. China most specifically has just experienced two quite challenging years of bean imports with logistical and well as monetary issues creating problems. I believe this has somewhat masked the reality that world ending stocks of beans have continued to grow for the past four years and are projected to set a new record in both raw quantity and when measured as a stocks to usage ratio. Without a problem in the Southern Hemisphere this season, I cannot help but think this large supply will come to roost on bean prices.

As with corn and wheat, I would not look for much fresh trade today but if we have not developed any new problems through this long weekend, it would appear we could have a difficult time holding above the 10 level for much longer.

It should come as a surprise to no one but tensions and fighting have increased once again in Ukraine and helped spur buying overnight in the wheat market. Kiev has claimed that Russian troops have entered their territory and captured several villages but other news reports that I have read indicate this has been a counter offensive by the separatists. Regardless, with the trade already quite short in this market and a long weekend looming ahead it has been enough to entice some of the bears to the sidelines.

Also providing a little support this morning is a short-term dry forecast in the wheat growing regions of Australia. Unless we see the longer-range forecasts change this should have little effect on their crop prospects but when you add this to the other concerns from the Black Sea region, some traders will opt to error to the cautious side.

On the other side of the ledger is Russia. Granted, they play significantly into the situation with Ukraine but estimates for their crop potential continue to grow. More analysts are joining the crowd that believes the total wheat crop will be in excess of 60 MMT. The last USDA report has them at 59.

Wheat exports sales were uneventful and right in the middle of trade expectations at 403,600 MT or 14.8 million bushels. The top purchasers were Brazil at 94k MT, Nigeria at 93.7k MT and Japan at 89k MT.

The initial strength overnight in the wheat did push us into key overhead resistance but prices have cooled as we came into the daylight. As I have commented previously, I believe wheat has absorbed and priced in much of the negative supply information and with the speculative trade leaning to the short side, we could be poised for corrective rallies at anytime. I am not sure if the current news is enough to stimulate an extended run but will be watching closely to see if we can actually poke through the upper side of the range after the long weekend ahead.

Corn

The corn market has experienced a little two-sided action overnight and remains in a holding pattern. This very well could extend through the upcoming long-weekend but I expect to see us move out of the range after that and they way things stack up right now, it is difficult to imagine that being to the upper side. Early yield reports out of the south continue to be outstanding and it I have to imagine the trade will begin factoring in higher yields as we work out to the September 11th crop production and supply/demand estimates.

As we are right on the cusp of wrapping up the end of the marketing year, exports sales for this crop year reflect a balancing between old and new. As such, we registered a negative 32,700 MT or -1.3 million bushels. This places year to date sales at 1.9155 billion bushels, just below the targeted 1.92 billion. Sales for the 2014/15-crop year were towards the upper end of the estimates but nothing to write home about at 695,600 MT or 27.4 million bushels. Top purchasers were Columbia at 140.9k MT, South Korea at 125k MT and Costa Rica with 120.5k MT.

With the temperature forecast for the next 30 days predicting normal to above normal temperatures, little happening in the export scene, funds still long in the corn and promising early yield reports, it would seem that it will be increasingly difficult to see corn continue to hold this sideways pattern. I just saw a yield update out of central Illinois reporting a range of 230 to 270 b/p/a. As my associate Jake Wiener likes to say, the longer you have to hold your arms outstretched, the more likely you are to be come fatigued and eventually have to let them drop. Without a little assistance to prop up the arms of this corn market, they could soon give out.

Soybeans

The pattern in the bean market since July has been to drop into lower lows and then just track a bit sideways for a bit before grinding lower once again. That appears to be the case this past week as November futures pushed through 10.35 and reached the 10.20 level only to move flat from there. The bean bull has never given up easily this year.

For the second week in a row and of course the second to last week of the marketing year, we posted a negative sales number for the 2013/14 crop. This time the number was -62,800 MT or -2.3 million bushels. This still leaves us with sales of 1.691 billion bushels, which is 51 million above the USDA target. 2014/15 sales were down 9% for the week but still solid at 1,290,800 MT or 47.4 million bushels. Just over 50% of these sales were to China who took 655k MT followed by Vietnam at 112.2k MT and unknown destinations at 96k MT.

As with the corn market, with no serious weather threats on the horizon, increasing harvest activity and very solid yield estimates it is difficult to imagine that we will not see prices erode further as we move into the month of September. That said, after spending more than 35 years in this business I know that when everything looks obvious and one-sided it is time to be in the lookout for an unexpected event so you are not blindsided. That said as it stands right now, the path of lease resistance remains lower.

It seems that I am having to scratch a little harder each day to uncover fresh news for the markets. As expected the Egyptian wheat tender went to Russia and Romania with no U.S. wheat even offered due to the fact we would not have been competitive anyway. Wet conditions continue to hamper harvest of the spring crop but at this point, the market does not appear to be overly concerned. On the opposite side of the world, Australia has continued to see increased rainfall which has improved crop prospects "down under" with trade estimate for production in the 23 to 27 MMT range compared with the last USDA number of 26. Seeing this falls within existing numbers would say that it is not bearish per se but after the El Nino hype earlier this year and what has been drier than normal conditions, it removes a possible stimulus. ABARE, who is the Australian counterpart to the USDA will release estimates on the 8th of September.

Wheat was able to bounce away from base support once again yesterday, possibly aided by increased tensions and a few rumor again from Ukraine but that momentum has waned quickly this morning. As I commented yesterday, there remains a possibility that we could see prices dip into lower lows in the days ahead but I would not expect a new leg lower. For now I look for additional sideways activity.

Corn

Even though we were able to bounce away from support again yesterday, the corn market struggles and it would appear that it is only a matter of time before the impending harvest forces us into lower lows. If there were any dry pockets in the upper Midwest it would appear they have pretty been eliminated or at least will be over the next 7 days and in parts of Iowa, Minnesota and Wisconsin, it would appear that we have swung the pendulum completely in the other direction. While that could ultimately delay the maturity of the crop and could even hamper early harvest activity, it is always challenging to get markets overly excited about too much rain at any time of the year.

While many southern states have been turning to beans to capture the nearby premium, corn harvest has been making progress. As of last weekend it was estimated that Texas was 46% complete, Georgia 56%, Louisiana 38% and Mississippi 20% with a few others registering in the 1 to 10% range. I wish I could provide solid yield data at this point but only have partial information. That said, the numbers we continue to hear are impressive.

The weekly ethanol number will be released later this morning and should be continue to remain solid with the profitability in the industry.

I am somewhat surprised and mildly impressed that the corn market has been able to hold on a well as it has to this point but as I commented initially, it would appear to only be a matter of time before the floor give way to the weight of record production. We may be able to hold ground into the long weekend, but if nothing bullish materializes before next week, that should become increasingly difficulty to do.

Soybeans

As with corn and wheat, beans were able to bounce from the early pressure yesterday and actually extended a little higher this morning but the onset of harvest and some exception bean yield reports has pretty well taken all the wind from the sails. A few weeks ago I had heard reports that in the Delta, some beans were measuring near 100 b/p/a and I read overnight that 400 acres harvested in Mississippi came across the scale at 96 b/p/a. Incredible.

The possible counterbalance to this has been reports of Sudden Death Syndrome showing up in Indiana and Illinois.

We have seen November beans reach the upper end of our price target at 10.20 and price could stabilize now into the long weekend. Regardless, unless weather really take a turn for the worse and brings harvest to a halt, I suspect we will head down to at least the lower targets at 9.80 in September.

We have defensive overnight trade across the floor but understandably wheat appears to be the least impacted. As I have noted previously, wheat should have already factored in much of the supply situation, at least on the domestic fro